It’s earnings season. Talked to ECommerce Times this morning on IBM’s Q3.
IBM reported third-quarter sales of $24.7 billion . This is below Wall Street expectations of $25.4 billion. The weak performance was across all IBM business segments, including services and software. IBM hardware sales fell 13% to $3.9 billion. Net income was flat at $3.8 billion, which means IBM did a good job managing its costs. It was able to increase its gross profit margin by 0.9%. Well done. The big issue is growth.
IBM is dealing with two major issues.
Like any other tech companies IBM is battling a weak world economy. Things in the US are slow. The Europeans trying to avoid an economic Armageddon with Greece being on the brink of default and Spain being on the verge of having to request a bailout. These countries are followed by Italy, Portugal and Ireland. Other European economies do better but overall things are not looking good. China has slowed down as well. IBM’s business depends heavily on companies making expensive infrastructure decisions. Those are easily postponed in times of uncertainty.
The second problem for IBM is that it doesn’t have any “cool gadgets”. They sell PCs which are more like office workhorses than fun devices. However, people buy with their discretionary income tablets, smart tvs, smartphones and gaming consoles. IBM has no market share in these market segments.
It’s unlikely that IBM will be competing against the Apple’s of this world anytime soon. For IBM the hope is that its bets on higher-profit software and services, such as data analysis and cloud computing, are paying off.