IBM Says Economy Remains Discouraging

December 15, 2013 Leave a comment

IBM Says Economy Remains Discouraging

International Business Machines Corp. (IBM), the world’s largest provider of computing services, continues to face economic challenges as it tries to reignite declining sales, Senior Vice President Erich Clementi said. Demand for technology services, IBM’s biggest source of revenue, “depends on what the economic climate is, and that has not been very encouraging,” Clementi said at a Bank of Montreal conference in New York yesterday. “Europe has shown signs of recovery. North America has been a little more uncertain.”Many businesses remain wary about spending money on physical assets, such as computer hardware, machinery or warehouses. Instead, they’re using software and cloud-computing services to increase efficiency and reach more customers over the Internet. While IBM ultimately expects to benefit from that shift to the cloud, the hardware slump has contributed to six straight quarters of declining revenue.

“The big bet is on cloud and the software that are on top,” Clementi said.

SoftLayer Technologies Inc., a cloud-computing storage provider that IBM acquired in July, will help the company compete with rivals like Amazon.com Inc., he said. IBM paid about $2 billion for the Dallas-based company, a person with knowledge of the deal said earlier this year.

The Armonk, New York-based company’s total sales slid 4 percent last quarter from a year-earlier period. IBM also posted its first-ever revenue decrease in traditional growth markets in the period, with sales in China tumbling more than 20 percent.

Earnings Goal

Even so, the company is still targeting earnings of $20 a share in 2015. To help reach that goal, IBM will continue its shift into higher-margin business and focus on cloud computing, Clementi said.

IBM reported more than $1 billion in revenue from cloud products and services last quarter — the first time it has disclosed sales from that category. The move followed an investigation by the U.S. Securities and Exchange Commission into the finances surrounding IBM’s cloud business.

IBM shares were little changed today in New York, trading at $177.30 as of 9:33 a.m. They had declined 7.5 percent this year through yesterday, compared with a 22 percent advance for information-technology stocks in the Standard & Poor’s 500 Index.

To contact the reporter on this story: Alex Barinka in New York at abarinka2@bloomberg.net

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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