IBM Profit, Sales Trump Estimates; Shares Up

(RTTNews) - International Business Machines Corp. (IBM) Tuesday reported a drop in profit for the third quarter, as revenues continue to decline, hurt largely by sharp drop in hardware sales. Nevertheless, the company's quarterly earnings trumped Wall Street estimates as did revenues, reflecting strong performance of its cloud business. Shares are up 3 percent in extended trading session.

Armonk, New York-based IBM's third-quarter profit dropped to $2.73 billion or $2.92 per share from $2.85 billion or $2.98 per share last year.

Excluding one-time items, earnings from continuing operations improved to $3.30 per share from $3.29 per share last year. Analysts had a consensus earnings estimate of $3.28 per share for the quarter.

IBM's third-quarter revenues dropped to $19.15 billion from $19.23 billion last year. This marks the 22nd straight quarter the company has reported lower revenues. Analysts polled by Thomson Reuters expected revenues of $18.60 billion for the quarter.

IBM is divesting off its low-margin and unprofitable hardware businesses to improve profitability. The company is now striving hard to make IBM a company that provides cloud computing and data analytics.

Chief Executive Ginni Rometty said, "In the third quarter we achieved double-digit growth in our strategic imperatives, extended our enterprise cloud leadership, and expanded our cognitive solutions business. There was enthusiastic adoption of IBM's new z Systems mainframe, which delivers breakthrough security capabilities to our clients."

Third-quarter cloud revenues increased 20 percent to $4.1 billion, the company said. Revenues from analytics increased 5 percent, while revenues from mobile rose jumped 7 percent and revenues from security surged 51 percent.

Looking forward to 2017, the company continues to expect adjusted earnings of at least $13.80 per share. Analysts currently estimate earnings of $13.75 per share.

IBM closed Tuesday trading at $146.54, down $0.29 or 0.20%, on the NYSE. The stock, however, gained $4.90 or 3.34% in the after-hours trade.