Stefan Mileschin

Reinvention talking time

Big Blue posted profit margins that fell short of Wall Street expectations in a sign that its turn around was taking time.

IBM reported the second quarter of revenue growth after a near six-year streak of declines but that was not good enough for Wall Street which was unhappy that the company’s adjusted gross profit margin fell to 43.7 percent from 44.5 percent a year earlier.

The company said the decline in gross margin was mostly due to “significant” one-time charges. On an earnings call with analysts, IBM CFO James Kavanaugh said the company cut costs and took a $610 million charge in the first quarter, though he did not give details.

This announcement follows expectations of layoffs as IBM, under its Chief Executive Ginni Rometty, tries to offset declines from its legacy businesses.

The company said it had a tax benefit of $810 million, due to changes in the US tax law.

IBM has in recent years shifted its focus to higher-margin businesses such as cloud computing, cybersecurity and data analytics, to counter a slowdown in its legacy hardware and software businesses, but the move is not going as fast as some shareholders had hoped. However the company's legacy hardware business continuing to weigh on margins.

IBM’s revenue grew five percent to $19.07 billion in the quarter with 65 percent growth in sales from security services. Cloud revenue grew 25 percent.

https://fudzilla.com/news/46087-ibm-...t-expectations