Revenue growth slows at Big Blue
|Source: The company.|
Updated from 4:17 p.m. EDT: Technology juggernaut IBM ( IBM) Wednesday evening posted in-line second-quarter earnings on softer-than-expected sales. For the quarter, the Armonk, N.Y.-based company reported net income of $2 billion, or $1.15 a share, matching the consensus earnings estimate of analysts polled by Thomson Financial/First Call. Year-ago earnings were $1.06 a share.
Revenue, meanwhile, came in light. It totaled $21.6 billion, about $1 billion below expectations and roughly flat with the year-ago period. IBM wasn't bullish about the second half, saying ongoing weakness in PCs and hard disk drives will continue to hurt results. Additionally, IBM said it is now seeing signs of slowing in its microelectronics business as OEM customers reduce purchases. IBM has risen more than 20% this year, as investors have embraced the very thing for which critics attacked the company during the last years of the hyper-bull market: its diversity and its large exposure to the mainframe business. IBM holds a virtual lock on that business, which produces a stable stream of recurring maintenance and service revenue. Such annuities make up about 40% of IBM's sales.