IBM revenues drop 5% as hardware sales crash

Financial news

IBM revenues drop 5% as hardware sales crash

Bryan Glick

IBM has reported a small increase in its fourth quarter profit, but revenue declined due to an accelerating slump in its hardware business.

The IT giant – often considered a bellwether for the wider performance of the industry – saw overall sales drop 5% to $27.7bn compared with the same period in the previous financial year.

Two IBM employees walk past the IBM logo

The slump was driven by a 26% fall in revenue to $4.3bn from its systems and technology group, responsible for hardware such as the System Z mainframe, Power Systems and x86-based servers. The decline accelerated from the third quarter, when hardware sales were down 18% year on year.

By comparison, software sales grew 3% to $8.1bn, while technology services revenues fell 4% to $9.9bn.

However, fourth quarter net income grew 6% to $6.2bn, reflecting the higher margins delivered by the software and services businesses relative to hardware.

IBM is widely rumoured to be in discussions to sell its x86 server business, with rivals such as Lenovo and Dell mentioned as possible buyers. However, x86 sales were not the worst performer – revenue fell 16%, while Power Systems revenue dropped 31% and System Z mainframe sales declined by 37%.

For the full year, IBM’s overall net income fell 1% to $16.5bn, with revenue down 5% to $99.8bn.

"We continued to drive strong results across much of our portfolio and again grew earnings per share in 2013,” said IBM CEO Ginni Rometty.

”As we enter 2014, we will continue to transform our business and invest aggressively in the areas that will drive growth and higher value.”

Fourth-quarter revenue from IBM’s Europe, Middle East and Africa operations was up just 1% to $9.2bn. However, revenue from IBM’s key international growth markets in Brazil, Russia, India and China dropped 14% in the quarter, and 8% across the full year.

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