Investors unimpressed by IBM profit
Investors sold off IBM’s stock Monday after the company once again reported a fall in new contracts, as research firm Gartner forecast “timid” growth in corporate IT spending.
IBM’s NYSE share price fell 3.31% in after-hours trade after it reported a 7% decline in contract signings in its key services group, Bloomberg said.
Big Blue had reported an otherwise healthy result, with quarterly income up 12% and sales 3% higher.
“In the third quarter we grew revenue in our hardware, software and services businesses, expanded margins and again increased earnings per share at double digits,” said CEO Sam Palmisano, pointing to 29% revenue growth in BRIC markets.
However, investors were wary of the fall in new services contract, totaling $11.0 billion (€7.8 billion) for the quarter.
“Investors are likely to key in on IT-services signings being a bit below expectations,” Andy Miedler, an analyst at Edward Jones & Co told Bloomberg. “It’s a key measure of deal activity.”
The sell-off came as Gartner predicted global enterprise IT spending would grow just 2.4% this year and 3.1% in 2011.
“Over the next five years, enterprise IT spending will represent a period of timid and at times lackluster growth with spending totaling $2.8 trillion in 2014,” the research house said.
“Several key vertical industries, such as manufacturing and financial services will not see IT budgets recover to pre-2008 levels before 2012 or 2013,” said Peter Sondergaard, senior vice president at Gartner and global head of Research.
“Emerging economies continue to be the locomotive of enterprise IT spending, substantially outpacing developed economies.”