IBM Software, Hardware Down as Big Blue Misses Q1 Mark

IBM’s first quarter 2013 financial results fell short of estimates, as the company struggled to close deals at the end of the quarter.

IBM failed to meet Wall Street estimates for its first quarter 2013 earnings, with net income coming in at $3 billion–down 1 percent from the same period a year ago.

Big Blue’s revenues for the quarter were $23.4 billion, down 5 percent from the same period last year and short of analyst estimates of $24.7 billion.

“In the first quarter, we grew operating net income, earnings per share and expanded operating margins but we did not achieve all of our goals in the period,” said Ginni Rometty, IBM chairman, president and chief executive officer, in a statement. “Despite a solid start and good client demand we did not close a number of software and mainframe transactions that have moved into the second quarter. The services business performed as expected with strong profit growth and significant new business in the quarter.”

In a call with analysts to discuss IBM’s Q1 results, Mark Loughridge, senior vice president and chief financial officer for finance and enterprise transformation at IBM, said, “This quarter certainly didn’t close the way it started. We had solid profit performance in January, but as the quarter ended, hundreds of millions of dollars of very profitable software and System z mainframe deals fell short of the goal line. This impacted the first quarter close, but the rollover of these deals positions us for a strong start in our software and mainframe businesses in the second quarter.”

Analysts indicate that IBM is suffering from economic uncertainty in the U.S. and abroad and some indicate the company’s standing as a bellwether could impact other tech stocks. However, Loughridge projected confidence in IBM’s ability to weather turbulent times by focusing on higher value solutions and said the company is “going to roll up our sleeves to get this back on track.”

IBM said revenues from its software segment were flat at $5.6 billion compared with the first quarter of 2012. Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Social Workforce Solutions (formerly Lotus) and Rational products, were $3.5 billion, up 1 percent versus the first quarter of 2012. Operating systems revenues of $578 million were down 2 percent compared with the prior-year quarter. Revenues from the WebSphere family of software products increased 6 percent year over year. Information Management software revenues decreased 2 percent. Revenues from Tivoli software increased 1 percent, while revenues from Social Workforce Solutions software increased 8 percent, and Rational software decreased 2 percent.