International Business Machines Corp.’s (NYSE:IBM) second-quarter earnings declined 17% as the computing and tech services giant recorded weaker hardware and services sales and significant workforce reduction expenses.
However, shares rose 3.4% to $201.21 after hours as earnings beat expectations and the company lifted its full-year view. Big Blue now sees operating earnings of at least $16.90 a share, up from its prior view of least $16.70 a share.
IBM’s results are often read as an indicator of the health of tech spending among government and corporate customers. The company is known for aggressively shedding less profitable businesses and cutting costs while bulking up its catalog of more unique offerings–such as consulting services, analytics software and data-storage systems–where it can earn wider margins.
However, a number of analysts have raised concerns that IBM, which makes much of its money selling software, hardware and computer systems, may be on the wrong side of a major technology shift, known as cloud computing.
The latest period’s results follow a rare earnings miss in the first quarter as sales of software and server products were particularly weak, which prompted a round of restructuring at the company. The most recent quarter included $1 billion in workforce reduction expenses.
Overall, IBM reported a profit of $3.23 billion, or $2.91 a share, down from $3.88 billion, or $3.34 a share, a year earlier. Operating earnings, which exclude retirement-plan costs, amortization and workforce reduction charges, were $3.91 a share.
Revenue slipped 3.3% to $24.92 billion, or down 1% when adjusted for currency fluctuations.
Analysts most recently predicted earnings of $3.77 a share and revenue of $25.37 billion.
Gross margin widened to 48.7% from 47.6%.
Revenue in IBM’s systems-and-technology unit, which includes its hardware business, fell 12%. The unit has now seen year-on-year revenue declines for seven straight quarters.
The software segment’s revenue rose 4.1%. Technology services revenue was down 4.6% while business services revenue slid 1.3%.
Services backlog totaled $141 billion, unchanged from the first quarter.
The stock had fallen 7.2% over the past three months, through the close.
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