IBM blames poor performance on weak sales

IBM posted a rare quarterly earnings miss as the technology services company struggled with the depreciation of the Japanese yen and a failure to close a number of major deals, especially in Europe and the United States.

Much like Oracle last month, IBM blamed a poor performance by its sales force for some of the shortfall.

But analysts said it was not just one quarter - the company's sales have been weakening consistently, dragging down results with or without the changes in the yen.

"Their revenue has been declining for basically many quarters in a row. You can't have revenue declines and consistently expect your earnings to beat. That is catching up with them," said ISI Group analyst Brian Marshall.

IBM is known for keeping a tight rein on costs and focusing on high-margin software, allowing it to generally exceed Wall Street expectations, even in a tough economic environment.

Net income was $3 billion, or 1 per cent less than in the year-earlier quarter, the company said. Its operating earnings rose 8 per cent to $3 a share, compared with $2.78 a share last year.

The company's per-share earnings typically surpass the net income results because IBM spends billions of dollars each year buying up its own shares, so there are fewer.

The profit performance was 5 cents below the average estimate of Wall Street analysts of $3.05 a share.

Revenue for the quarter declined 5 percent to $23.4 billion, held down by the continuing economic weakness in some markets and a stronger dollar.

Chief financial officer Mark Loughridge blamed poor sales execution for the failed closing of a number of deals, as well as the Easter holiday at the end of March.

Around $400 million worth of deals expected to close in the first quarter had been moved into the second, IBM said.

On a conference call with analysts, Mr Loughridge also said it was unclear whether the sequester - a series of automatic US federal budget cuts - had an effect.

"It's hard to measure. I can tell you that our US federal business was down 13 percent, which was certainly a drag on the US performance," he said.

The yen was at least something of an issue in the quarter as well.

The deterioration in the Japanese currency since mid-January reduced earnings by 7 cents per share, a spokesman said. Mr Loughridge said IBM was "clearly not immune from changes in the global economy," noting the weak yen and the difficulty IBM has had in hedging that currency.