IBM has announced an increase in profits in Q3 2013 but also has disappointed many market observers as the company confirmed that total revenue declined in the quarter.
On Wednesday, October 16, the company reported a net income of $4 billion in the quarter ending September 2013, which is a rise by six percent. However, IBM also reported $23.7 billion as total revenues, which is 4 percent decline when compared to Q3 of 2012. The total revenue decrease is much lower than what many analysts had been expecting.
The company's computer hardware division was worst hit in Q3 2013 will sales dropping by 17 percent.
IBM indicates that the reason for the drop in total revenue is a 40 percent drop in hardware sales in China, as the country is planning to implement a new economic reform plan in November this year. However, once the economic reform plan is announced by China in November it will provide clarity to the markets and there may be recovery for companies like IBM.
"In the third-quarter we continued to expand operating margins and increased earnings per share, but fell short on revenue. Where we had identified high growth opportunities and pursued them aggressively --- cloud, mobile, business analytics, and security --- we continued to show strong growth. This underscores our strategy to continuously transform the company to high value," said Ginni Rometty, IBM chairman, president and chief executive officer.
The decline in total sales may not have come as a surprise to many market observers as IBM has not reported a total revenue rise in quarterly sales since Q4 2011.
IBM claims that the company is also taking appropriate action to improve execution in the growth markets units and also in the hardware businesses that are currently under performing. IBM announced at the earnings call that it forecast for Q4 is $16.25 a share and $20.00 a share for 2015.
The company's Chief Executive officer, Ginny Rometty, who took over in January 2012, will undoubtedly be under immense pressure to meet IBM's current forecasts.
IBM share price plummeted six percent after the earning announcement made by the company.
