IBM's revenue fell slightly short of Wall Street expectations, sending its shares down almost 2 percent in late trade even as the company beat quarterly profit expectations and boosted its 2012 earnings target on strong software demand.
International Business Machines, whose shares had closed up 2 percent on Tuesday, reported revenue of $24.7 billion - flat with the previous year and below analyst expectations for $24.78 billion, according to Thomson Reuters I/B/E/S.
The company, which has been shifting its focus from hardware to higher-margin services and software over the past decade, raised its full year target to at least $15 adjusted earnings per share on strong demand for its software services and growth in emerging markets. Analysts had on average anticipated $14.94. IBM's previous target was for at least $14.85.
Despite the share reaction, some investors were heartened by the strong guidance for the full year and IBM's profit growth.
IBM's Chief Financial Officer Mark Loughridge promised IBM would deliver revenue growth again in the second half of the year once it overcomes some obstacles in the second quarter such as currency headwinds and two challenging projects in Japan. Loughridge said the software business - IBM's largest segment - had a strong quarter with revenue of $5.6 billion, up 5 percent and that its smallest unit, the systems and technology business, declined as expected, falling 7 percent.
In services, IBM said its IT consultancy unit GBS declined 2 percent mainly due to problems in Japan and little demand in the public sector, while demand for its infrastructure services grew 2 percent.
IBM also competes with business software makers Oracle Corp and SAP AG as well as computing giant Hewlett Packard. IBM said earnings per share, excluding items, in the first three months of the year were $2.78 - beating average analysts' earnings per share of $2.65. Net earnings rose 7 percent to $3.1 billion.
The company's shares fell 2 percent to $203.50 in late trade after closing up 2 percent at $207.45 on New York Stock Exchange.
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