April 18, 2012- IBM, one of the stalwarts on the DOW Industrials, announced its first quarter earnings on Tuesday. Big Blue saw its earnings jump by 7.1%. The company reported increased revenue from its technology and software services sectors, but saw its hardware sales decline.
IBM reported weaker than anticipated revenue due to hardware sales dipping by 6.7%, during the quarter. Shares of IBM dropped in after hours trading following the announcement by Mark Loughridge the company’s Chief Financial Officer. He blamed the second consecutive decline for hardware revenue on last year’s strong first quarter, making it hard to compare the present quarter to it.
IBM has done well by pushing towards complex business that is higher margin like business analytics and away from crowded areas where price is the only way companies can compete. However, of late, worries have started to emerge about the economic environment hurting companies spending on technology causing IBM’s revenue stream to be lighter than normal for the last few quarters.
Most analysts are not surprised that revenue is lighter as IBM has pruned its portfolio to maximize its earnings generation. On Tuesday morning, IBM sold its POS system used in many retail stores worldwide to Toshiba for an estimated $850 million, just another example of its elimination of low margin businesses.
Shares of IBM have increased 25% in just 12 months through the stocks close on Tuesday, although it slipped by 2% in after hours trading to $203.