By Brian MacIver
Despite declining net income and revenue, tech giant IBM Corp. reported late Monday a better-than-expected increase in adjusted earnings, causing its stock to jump more than 3 percent in after-hours trading before declining on Tuesday.
Net income decreased to $2.33 billion, down from $2.38 billion a year earlier.
Diluted earnings per share for the first quarter ended March 31 were $2.35, compared with $2.29 a year ago, and short of analysts’ expectation of $2.55. Adjusted earnings per share were $2.91, up from 2014’s first quarter $2.54 and above analysts’ estimate of $2.81.
The company bought back $1.17 billion of shares, down from a year ago.
IBM’s revenues were negatively impacted by a continued selloff of divisions, a struggling hardware division, and the strength of the American currency.
IBM has been liquidating several of its divisions in order to restructure and refocus the company’s mission. Discontinued operations represented a loss of 9 cents in earnings per share.
Systems hardware showed a decrease in revenue to $1.66 billion from $2.14 billion at the same time last year. However, the gross profit margin was up by 10.5 percentage points, indicating the company is cutting into expenses as well as into revenues.
Chief Financial Officer Martin Schroeter said in the conference call that “currency had an eight point effect on revenue.” This indicates a decrease of $1.78 billion in the company’s revenue.
Analysts were wary of the company’s decrease in revenue from its services department. Tien-Tsin Huang, an analyst at JP Morgan in New York, noted a “deceleration in GTS,” or Global Tech Services. IBM reported a decrease in the department’s gross profit margin of 1.4 percentage points.
Despite the slow start, the company is projecting net earnings per share between $14.17 and $14.92 for 2015. At best, this indicates a drop of 4.3 percent from last year, but is within the range of analysts’ estimates.
The stock closed at $164.26 on Tuesday, down $2.88 from Monday’s close of $167.14.