IBM hardware revenues plunge 26%

IBM missed revenue expectations for the fourth consecutive quarter as the world's biggest technology services company grappled with weakening demand for its servers and storage equipment, particularly in growth markets like China.

As a result of the disappointing results, chief executive officer Ginni Rometty and her team will forgo their annual incentive payments for 2013 as IBM's total revenues fell 2 per cent to $99.8 billion for the year.

Total revenue for the quarter ended December 31 fell 5 per cent to $27.7 billion, missing analysts expectation of $28.25 billion.

Hardware revenue plunged 26 per cent, leading to a $750 million collapse in profit for that segment. IBM shares fell 3.5 per cent to $181.68 in after-hours trade.

IBM’s results are certain to accelerate the company’s restructuring.

"As we look forward to 2014, we will continue our transformation," Martin Schroeter, IBM's chief financial officer, told analysts. "We will acquire key capabilities, we will divest businesses and we will rebalance our workforce as we continue to return value to shareholders."

IBM, which has been expanding its higher-margin services and software businesses over the last decade, is expected to relinquish more of its lower-margin hardware business.

Revenue in that business, which includes server and storage products, fell for the ninth consecutive quarter as more companies switched to the cloud from traditional infrastructure.

Emerging market sales dropped 6 per cent, led by China, where IBM reported a 23 per cent collapse in revenue.

A backlash against US government spying in emerging economies and a move by Beijing to encourage state-owned companies to buy domestically-branded products contributed to plummeting demand, some analysts said.

Reuters