(Reuters) – International Business Machines Corp missed Wall Street estimates for quarterly revenue on Thursday, hurt by a rare sales decline in its software unit as clients shied away from longer-term deals due to pandemic-induced economic uncertainty.
The 109-year old firm is preparing to split itself into two public companies, with the namesake firm enhancing its focus on the so-called hybrid cloud, where it sees a $1 trillion market opportunity.
IBM beat profit estimates on the back of strong growth in its cloud business, and said it is confident of returning to sales growth in 2021.
That was not enough to convince traders, however, as the company’s shares dropped nearly 4% after the bell following IBM’s fourth consecutive quarter of sales decline.
“Clients are opting for shorter duration deals, which is impacting our average deal revenue size,” Chief Financial Officer James Kavanaugh told Reuters.
“Given the economic uncertainty, clients are trying to understand their business and their business volumes over a long period of time.”
Kavanaugh noted that momentum in its cloud business as well as a weaker dollar make the company confident of returning to sales growth.
Revenue from IBM’s cloud-computing business rose 10% to a record $7.5 billion during the fourth quarter.
Total revenue fell 6.5% to $20.37 billion, missing analysts’ average estimate of $20.67 billion, according to IBES data from Refinitiv. Excluding the impact from currency and business divestitures, revenue declined 8%.
Excluding items, the company earned $2.07 per share, above estimates of $1.79.
(Reporting by Munsif Vengattil in Bengaluru; Editing by Devika Syamnath)
