ARMONK, N.Y. (AP) — IBM's third-quarter earnings report rattled some investors Tuesday by falling well short of analysts' revenue projections. Much of the shortfall stemmed from changes in currency exchange rates that resulted in fewer dollars on sales made in Europe and other countries. But "more challenging" market conditions as the quarter came to a close in September also contributed to the 5 percent drop in revenue from the same time last year, according to Chief Financial Officer Mark Loughridge.
The troubling turn of events raised a question whether what happened in September was a temporary slowdown or signaled something worse for the technology industry in general and IBM Corp. in particular. Loughridge shared his thoughts Tuesday during a conference call discussing the third-quarter numbers.
QUESTION: I was wondering if you could provide some color commentary around the quarter. Relative to expectations, revenues were short. Your tone, I think, sounded a bit more cautious, and you made several references to the U.S. being weaker and the third month of the quarter being more challenging. So specifically on those latter two points, can you help us understand what you think happened? Is this being driven by macroeconomic issues? Are these IBM execution issues?
ANSWER: So if you look at the third quarter performance, we did start off the first two months of the quarter on a stronger trajectory than we saw for the full quarter, as we saw a falloff in our growth rates in the third month of the quarter. Now within that third month phenomenon ... it was really a falloff that we saw in our (consulting and services) business, number one. And in our software business, number two.
And from a geographic perspective, it was really a falloff that we saw in North America in our "growth markets" unit, which we refer to as GMU .... The software content, I would attribute to a handful of deals that fell out of the quarter. Frankly, we thought we have those right through the end of the quarter. They rolled to the fourth quarter. They would have accounted for about two points improved performance, which would have been more consistent with what we saw in the first two months of the quarter.
- Investment & Company Information