International Business Machines Corp. Tanks On Earnings Miss

International Business Machines Corp. Tanks On Earnings Miss
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International Business Machines Corp. (NYSE:IBM) released the earnings results from its most recently completed quarter this morning, posting non-GAAP earnings of $3.68 per share on $22.4 billion in continuing operations revenue, a 3% decline from the same quarter last year. Analysts had been expecting earnings of $4.32 per share on $23.37 billion in revenue.

IBM’s key earnings metrics

GAAP earnings per share fell 8% year over year to $3.46 for continuing operations. IBM reported a net loss of 2 cents per share and net income of $18 million on its discontinued operations.

International Business Machines posted a GAAP gross profit margin from continuing operations of 48.6%. Cloud revenue has increased by more than 50% so far this year. Revenue from business analytics increased 8%, while mobile revenue has more than doubled so far this year. Security revenue has increased by more than 20% year to date.

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Revenue from the Americas fell 2% to $10.1 billion. Revenue from Europe, the Middle East and Africa also fell 2%, declining to $7.2 billion. Revenues from the Asia Pacific revenue fell 9% to $5 billion. In IBM’s growth markets, revenue fell 6%. In Brazil, Russia, India and China, revenue fell 7%.

Software revenue fell 2% to $5.7 billion, while Global Financing revenue declined 3% to $487 million. IBM’s continuing operations in its Systems and Technology division fell 15% to $2.4 billion, while Power Systems revenue fell 12% year over year.

IBM management will provide guidance for the current quarter during today’s earnings call.

IBM pays up front to get rid of chip operations

This morning IBM and GlobalFoundries announced a deal for the latter to acquire the former’s Microelectronics manufacturing semiconductor business and manufacturing operations. The segment is listed in this morning’s earnings report under discontinued operations. They expect the deal to close sometime next year.

Included in the results from IBM’s discontinued operations is a one-time pretax charge of $4.7 billion, which includes “an impairment to reflect fair value less estimated costs to sell the Microelectronics business assets.” Included in that charge are also costs related to that deal. IBM will transfer about $1.5 billion in cash to GlobalFoundries over the next three years. That amount will be adjusted by working capital due by GlobalFoundries to IBM, which the two parties estimate to be about $.2 billion.

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