The shares of International Business Machines (IBM) corp. saw a huge decline in revenue for the first time in five quarters. A low demand for company’s traditional IT services has been identified as the reason behind the great fall.
The shares went down by nearly 4.94 percent to $162.00 in the after-hours trading and refused to gain around on Wednesday.
IBM has been shifting its focus towards advanced service portfolio, including cloud-based services, data analytics, security software and artificial intelligence since the demand for its legacy products (hardware and software) came down.
The company was able to grow in the first quarter due to its strategic innovations but failed to remove loopholes from its core operations – like in the technology services and cloud-platforms’ business. IBM missed out on some of the largest deals in the business, and a couple of big clients took their operations in-house per the CFO, Martin Schroeter, IBM. All this resulted in IBM’s revenue coming down and losses accumulating to 2.8 percent in the first quarter to 1.3 percent in the fourth quarter.
Total revenue reportedly fell 2.8% to $18.16 billion, which even missed the analysts’ estimate of $18.39 billion. It also saw a decline of 2% in its infrastructure services.
“I think the frustration lies with the overall miss on revenue,” Bill Kreher – Analyst, Edward Jones, told a news channel. “The Street has given IBM some credit over the last year that the transition is taking shape, so I think that’s where the risk lies execution needs to be strong.”
Revenue of its technology services and cloud services dropped 2.5 % to $8.2 billion. The business accounted for nearly 45 % of the total revenue.The net income of IBM slumped to $1.75 billion from $2.01 billion.