IBM Slumps As China Problem Takes Hold

IBM Slumps As China Problem Takes Hold

International Business Machines Corp. (NYSE:IBM) earnings arrived yesterday after the bell rang to close the day on Wall Street. The information technology company beat expectations on earnings, but missed out on revenue by a whopping $1 billion. The release left the company’s shares reeling. At time of writing, shares in IBM are down more than 5 percent for Thursday’s trading.

IBM Slumps As China Problem Takes Hold

Sales across the board appeared to have been down for International Business Machines Corp. (NYSE:IBM) in the third quarter of the year. America was flat, Europe was down a little and Asia Pacific was down a great deal. The company’s biggest worry, however, is China. Sales in the Asian giant dropped 22 percent year on year.

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IBM’s China problem

It is difficult to tell if there is a big problem in the country. The International Business Machines Corp. (NYSE:IBM) drop in business might be a problem at that company, or it might indicate a dearth of enterprise IT spending in China. We’ll know whether that is true when IBM competitors report numbers.

The stock market does not appear anxious to make sweeping decisions just yet. Cisco Systems, Inc. (NASDAQ:CSCO) shares are down a little over 1 percent at time of writing. The company’s earnings call will not take place until the middle of November. Investors have a lot of time to mull their decisions over.

The International Business Machines Corp. (NYSE:IBM) hardware business was the hardest hit part of the company in China. Sales at the hardware division were down 40 percent year on year in the third quarter. There are several kinds of problems that might be brewing in China. the country could be entering a contraction, competitors could be gaining business, and IBM might have a brand or customer service problem.

China teeter

There are a lot of things that International Business Machines Corp. (NYSE:IBM) might be doing wrong in China, and any of them could have caused a large decline in sales. That’s a worry for the company. If IBM sales in China are down because of problems in that country’s economy, the entire market will sit up and listen.

General Electric Company (NYSE:GE) will release an earnings report tomorrow morning. Investors will be looking for signs of weakness in the company’s Chinese business. If they’re there, there might be trouble in the far east.

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