IBM warned on Monday that its first quarter sales will fall about $1 billion short of Wall Streets expectations because its customers are continuing to delay purchases, rekindling fears that the high-tech industry still remains mired in a more than yearlong slump that has battered earnings.
The warning by the worlds largest high-tech company reverberated through the stock market on Monday, sending IBMs stock price down about 11 percent and undermining the share prices of major computer industry players as well, such as Intel Corp., Microsoft Corp. and Sun Microsystems Inc.
Rumors that IBM was struggling first began swirling last Friday when the company reportedly laid off 600 workers in its Global Services division.
IBMs chief financial officer blamed the shortfall on weak demand for its products that reflected corporate customers continued concerns about the U.S. economy, which slipped into a recession last year.
"The business environment remains very tough," IBMs John Joyce said in a prepared statement Monday. "We saw a continued slowdown in customer-buying decisions in the first quarter … [as] many of our customers chose to reduce or defer capital spending decisions until they see a sustained improvement in their businesses."
IBM said it now expects to earn 66 cents to 70 cents a share for the quarter, well below Wall Streets estimate of 85 cents a share, based on a survey of market analysts by Thomson Financial/First Call. IBM predicted Monday that revenues will total $18.4 billion to $18.6 billion, more than $1 billion less than market analysts had been projecting prior to the warning.
While Joyce said IBM suffered from weak sales "across the board," he added that sales to other computer makers were particularly hard hit and were expected to be down about 35 percent from last year.
IBM will release its first quarter earnings April 17.