International Business Machines Corporation Spooks Investors With Soft Sales, Weak 2014 Guidance

IBM's strategy shift delivered strong earnings but soft sales in the fourth quarter. Long-term goals remain intact, but don't expect big earnings in 2014.

Jan 21, 2014 at 7:26PM


IBM (NYSE:IBM) just reported fourth-quarter results, where non-GAAP earnings jumped 14% higher year over year on 5% lower revenue. Responding to this mixed bag, investors sent IBM shares 3% lower in after-hours trading.

IBM cleared Wall Street's earnings targets, reporting $6.13 of operating income per share. Sales were expected to drop, but not all the way down to $27.7 billion. Sales in the hardware-focused systems and technology segment plunged 26% from the year-ago total. This was the only division to report falling revenue.

Looking ahead, IBM projected full-year 2014 earnings near $17 per share, well below Wall Street's $18 target for this period. Still, CEO Ginny Rometty believes that her company is performing as it should. "We remain on track toward our 2015 road map for operating EPS of at least $20," Rometty said in the earnings release.

IBM is going through a radical strategy shift, putting more weight on high-margin software and services at the expense of lower hardware sales. These trends are not expected to change any time soon. "We will continue to transform our business and invest aggressively in the areas that will drive growth and higher value," Rometty said.

Fool contributor Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of IBM. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information