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TheStreet Open House

IBM Shares Slip on Revenue Miss (Update 1)

This story has been updated from 5:!4 p.m. ET with conference call comments from IBM CFO Mark Loughridge in the ninth, tenth and eleventh paragraphs.

NEW YORK (TheStreet) - IBM (IBM) edged past Wall Street's earnings forecast in its third-quarter results, released after market close, but currency pressures weighed heavily on revenue.

Excluding items, IBM earned $4.2 billion, or $3.62 a share, up from 10% from a profit of $3.28 a share in the prior year's quarter, and a penny ahead of the consensus view.

But the tech bellwether reported revenue of $24.75 billion in the September-ended quarter, down from $26.16 billion in the same period last year, and below the analysts' estimate of $25.36 billion. Currency negatively impacted IBM's revenue by nearly $1 billion in the latest period.

Investors responded negatively to the numbers, pushing IBM's shares down 3.6% to $203.49 on volume of 1.1 million in extended trading.

"In the third quarter, we continued to drive margin, profit and earnings growth through our focus on higher-value businesses, strategic growth initiatives and productivity," noted Ginni Rometty, IBM's CEO, in a statement. "Looking ahead, we see good opportunity with a strong product lineup heading into this quarter and annuity businesses that provide a solid base of revenue, profit and cash."

The Dow component also reiterated its outlook for non-GAAP 2012 earnings per share of at least $15.10. On a GAAP basis, however, IBM adjusted its 2012 earnings forecast to at least $14.29 per share, reflecting the impact of a U.K. pension-related charge.

Last week, the High Court in London ruled against the hardware and software giant on retirement provisions in IBM U.K.'s largest benefit plan. As a result of the ruling, IBM took a $162 million charge in the third quarter, which negatively impacted its GAAP income and earnings per share.

IBM's third-quarter software revenue came in at $5.8 billion, down 1% on the same period last year, or a 3% increase, adjusted for the effects of currency.

Speaking during a conference call after market close, IBM CFO Mark Loughridge cited a slowdown in business towards the end of the quarter. "We started the first two months on a stronger trajectory - we saw a fall off in the third month of the quarter," he said. "Geographically, we saw a fall off in North America and our growth markets."

Loughridge also pointed to a slowdown in Global Business Services revenue and software towards the end of the third quarter.

Specifically, the CFO pointed to "rollover" deals that were expected to close during the quarter, but didn't. "We need the growth markets and software to close these rollover deals that we saw," he said.

The company's Global Technology Services revenue fell 4% year-over-year to $9.9 billion, but increased 1% adjusted for currency. IBM's Global Business Services segment revenue was down 6% to $4.5 billion, or down 3% adjusting for the effects of currency.

--Written by James Rogers in New York.

>To submit a news tip, send an email to: tips@thestreet.com.

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