IBM Misses the Mark in Q1, Declining Hardware Sales Largely to Blame

IBM's net income in the first quarter of 2013 was $3 billion, a hefty sum though down slightly (1 percent) compared to the same quarter a year ago. Total revenues also took a hit, declining 5 percent (or 3 percent after adjusting for currency) year-over-year to $23.4 billion, while operating income managed to move in a positive direction, jumping 3 percent to $3.4 billion. Though IBM remained upbeat, the company readily acknowledged that it failed in certain areas.

"In the first quarter, we grew operating net income, earnings per share and expanded operating margins but we did not achieve all of our goals in the period. Despite a solid start and good client demand we did not close a number of software and mainframe transactions that have moved into the second quarter. The services business performed as expected with strong profit growth and significant new business in the quarter," said Ginni Rometty, IBM chairman, president and chief executive officer.

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IBM's hardware business was hit the hardest, declining 17 percent to $3.1 billion. Revenues from Power Systems dropped a staggering 32 percent, while its System Storage revenue dropped 11 percent, the company said.

Things didn't go nearly as bad on the software side. IBM's revenue from its software segment stayed flat at $5.6 billion, including a 1 percent jump in its middleware products, which added $3.5 billion to its bottom line. Revenues from operating systems contributed $578 million to IBM's purse, down 2 percent year-over-year.

Geographically, IBM collected $10 billion from the Americas, a decrease of 4 percent from last year. Revenues from Europe, the Middle East, and Africa totaled $7.3 billion, down 4 percent, while Asia-Pacific contributed $5.7 billion, down 7 percent. OEM revenues declined 16 percent to $426 million.
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