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

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.


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