IBM, one of the world's largest technology companies, stunned Wall Street last night by reporting first quarter earnings and sales that were well below analysts' estimates.
The surprise announcement also came two business days before IBM was supposed to report its first quarter results. IBM had previously said that the company would release first quarter numbers after the market closed on Monday April 18.
The company said that sales increased just 3% from a year ago. Analysts were forecasting a 6% increase.
IBM also said that excluding the effect of the weak dollar, which helps boost the value of IBM's international sales, revenue increased just 1% from the first quarter of 2004.
IBM chairman and CEO Samuel Palmisano said that the company had 'difficulty closing transactions in the final weeks of the quarter, especially in countries with soft economic conditions.'
Palmisano added that the company also experienced weakness in its massive global services unit, which accounted for more than half of the company's sales in the quarter. To that end, IBM reported contract signings of $10 billion for this division in the first quarter. Some analysts were hoping that IBM would report new bookings of at least $11 billion.
IBM's software and hardware businesses also posted soft results. Software sales were up just 2.4% from the same time last year while the hardware division, which includes servers, storage and personal computers, rose a scant 0.2%.
IBM is in the process of selling its PC business to China's Lenovo Group.
IBM chief financial officer Mark Loughridge said that the quarter had started well with revenue up 6% year-on-year during February. But sales fell in March, leading to the lower than expected results. IBM, like many technology companies, closes many deals in the final weeks of its quarter.
Loughridge said IBM saw the biggest drop-off in Italy, Germany, France and Japan. He added that IBM would take some restructuring actions to address some of the weaknesses in its business lines but he did not give specifics.
IBM employs over 4,000 people in several operations around the country - in manufacturing, eProcurement, sales and marketing, software development, consultancy, services and customer support and treasury operations.
