IBM revenue drops after weak demand for services

IBM has reported a bigger-than-expected drop in revenue for the first time in five quarters, hurt by weak demand in its technology services business.

Shares of IBM, whose revenue has now fallen for 20 quarters in a row, were down 3.7 percent at US$163.71 in trading after the bell on Tuesday.

The company said revenue fell 2.8 percent, to US$18.16 billion in the quarter ended March 31 from US$18.68 billion a year earlier.

Analyst on average were expecting revenue of US$18.39 billion, according to Thomson Reuters I/B/E/S.

With demand for IBM's legacy hardware and software businesses stagnating, chief executive Ginni Rometty has been shifting the company towards areas such as cloud-based services, security software and data analytics.

Revenue from these "strategic imperatives", as IBM calls them, rose 12 percent in the first quarter to US$7.8 billion. The business accounted for 42 percent of total revenue, compared to 37 percent last year.

The company's net income dropped to US$1.75 billion, or US$1.85 per share, from US$2.01 billion, or US$2.09 per share.

Excluding items, IBM earned US$2.38 per share, beating analysts' average estimate of US$2.35.

The company also said it expects adjusted earnings of at least US$13.80 per share for fiscal 2017, reiterating a forecast it gave on 19 January.

Since then, the average analyst estimate for earnings per share has risen from US$13.74 to US$13.78.

Up to Tuesday's close, IBM's shares have risen about 2.5 percent in 2017, less than the roughly 4 percent rise in the blue chip Dow Jones Industrial Average.

(Reporting by Narottam Medhora in Bengaluru; Editing by Savio D'Souza)