The technology giant delivered disappointing earnings last quarter and recently started cutting staff. Will Q2, 2013 be any better for CEO Ginni Rometty and the IBM team? The answer will come on July 17 after U.S. markets close.
The consensus estimate of analysts polled by Thomson Reuters looks for International Business Machines Corp. (NYSE:IBM) to report earnings per share minus items of $3.77. That would be a 7 percent increase from the year-earlier quarter and the second quarter in a row of single-digit growth, after 15 straight quarters of double-digit EPS growth.
The consensus revenue estimate is $25.4 billion, down 1 percent. It would mark the fifth straight quarter of single-digit declines.
IBM to fall short of revenue estimates
Brian White, an analyst at Topeka Capital Markets, expects International Business Machines Corp. (NYSE:IBM) to fall short of revenue estimates. "We expect cautious IT spending commentary," he wrote in a research note. White said there has been general tech spending weakness in Brazil, China and other parts of Asia that could challenge IBM, combined with continued softness in Europe. These were some of the same issues that hit Oracle and Accenture, as International Business Machines Corp. (NYSE:IBM) reported in this earnings roundup preview.
Challenging spending environment
"Given IBM's size and broad portfolio, the company's results will be carefully monitored as a barometer for the current IT spending environments," White wrote.
"IBM will face head winds from a challenging spending environment and softness in emerging growth markets," wrote Amit Daryanani, an analyst with RBC Capital markets, in a research report.
Cost savings due to layoffs
International Business Machines Corp. (NYSE:IBM) posted disappointing Q1 numbers and reported a 5 percent y-o-y decline in revenues to $23 billion. Additionally, IBM also posted a 1 percent y-o-y decline in net income to $3 billion in Q1. IBM embarked on a “workforce rebalancing” or job cuts during Q2. Most of the job cuts were in the ailing system and technology group. In this earnings announcement, investors want to know the expected cost savings that International Business Machines Corp. (NYSE:IBM) can generate from these job cuts going forward.
International Business Machines Corp. (NYSE:IBM)'s 2013 guidance is EPS of at least $16.70. IBM lost its usual buffer with the recent first quarter miss. If International Business Machines can't protect the bottom line from a likely revenue miss, guidance will have to come down. International Business Machines has always displayed strength on the earnings front and topped Street view thrice in the past four quarters. Over the past 90 days, the consensus earnings estimate has come down from $3.95 a share.
New York-based IBM, a Dow component, provides a wide range of services, software, and hardware solutions across multiple industry verticals. With annual revenues of over $100 billion, the company is the world's largest services vendor. IBM operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing.