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Big Blue misses estimates

by on21 October 2021

Managed infrastructure suffers decline

IBM missed market estimates for quarterly revenue as its managed infrastructure business suffered from a decline in orders ahead of a spinoff next month.

The lower-margin, legacy unit provides technical support to IBM's clients and has shrunk in recent years as companies moved to the cloud, becoming a drag on Big Blue's earnings.

Chief Financial Officer James Kavanaugh said as IBM issued the effective date for the spin-off of the managed infrastructure business, the clients paused all new project activities at the end of September.

Revenue at the global technology services unit, which houses the business set to be called Kyndryl after the spinoff, fell 4.8 percent to $6.15 billion in the third quarter ended Sept. 30.

Kavanaugh also said demand dropped at the systems business, home to IBM's mainframe computers, as the end of the product cycle neared, driving a 12 percent fall in the unit's revenue.

The slowdown in the legacy business has prompted 110-year-old IBM to shift focus to hybrid-cloud, an area where it sees a $1 trillion market opportunity, to boost growth and better compete with Amazon and Microsoft.

Revenue at the cloud and cognitive software unit was up 2.5 percent at $5.69 billion but missed analysts' estimates of $5.77 billion, according to Refinitiv data.

Total revenue rose slightly to $17.62 billion, missing expectations of $17.77 billion.

But IBM's revenue adjusted for the Kyndryl spinoff was 2.5 percent  higher, helped in part by firmer demand for its consulting services from enterprises digitising operations during the COVID-19 pandemic.

Last modified on 21 October 2021
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