IBM surprised Wall Street with results that fell short of already low expectations.
Chief financial officer Mark Loughridge said the company had trouble closing short-term services contracts in the last two weeks of March and that, as a result, he could not predict whether IBM would live up to analysts' second-quarter targets.
IBM's shares fell nearly 4 per cent to a 20-month low in after-hours trade following the unexpected report, issued four days ahead of schedule. The news provided another shock for the US stock market, which closed at 2005 lows ahead of the IBM news, as concerns over economic strength and earnings growth sparked a broad sell-off.
IBM posted a profit from continuing operations of $1.41 billion, or 85 cents a share, in the first quarter compared with $1.36 billion, or 79 cents a share, a year earlier.
Revenues from continuing operations rose a tepid 3 per cent to $22.9 billion from $22.2 billion a year ago, well below Wall Street analysts' expectations that ranged from $23.2 billion to $23.78 billion.
Excluding the effect of the weaker US dollar, revenue rose just 1 per cent year on year, the company said. IBM has suffered a steady slide in revenue growth in recent quarters amid weak organic growth and softening currency gains.
Several analysts noted that IBM's decision last week to begin accounting for stock option costs in the first quarter - months earlier than required by regulators - had muddied investors' understanding of the results. Options cut reported profit by 14 cents a share, IBM said.
Shares of IBM fell 3.8 per cent in after-hours trade following the surprise earnings announcement, adding to a decline of 1.1 per cent to $83.64 during New York Stock Exchange trading ahead of the news.