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IBM misses revenue estimates as server, software sales slow

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IBM misses revenue estimates as server, software sales slow

IBM misses revenue estimates as server, software sales slow
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Yves Herman(Reuters)
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(Reuters) - International Business Machines Corp missed Wall Street estimates for third-quarter revenue as software sales slow down and a boost from the launch of new server products begins to dry up, driving its shares down 4 percent on Tuesday.

Overall revenue slipped 2.1 percent to $18.76 billion in the three months ended Sept. 30, missing financial analysts' average estimate of $19.10 billion, according to I/B/E/S data from Refinitiv.

IBM's systems unit, which includes mainframe servers sold to large organizations, climbed about 1 percent, compared with a 25 percent jump in the previous quarter.

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Analysts have said sales of IBM's z14 servers, introduced about one year ago, are slowing down as customers await the launch of newer machines before upgrading. Still, systems sales of $1.74 billion fell short of analysts' estimates of $1.79 billion, according to FactSet.

IBM's cognitive software business, which houses artificial intelligence platform Watson, analytics and cybersecurity services, had sales of $4.15 billion, down 6 percent from a year earlier and also below expectations.

The Armonk, New York-based technology services giant, which makes over 60 percent of its revenue from outside the United States, has warned that the impact of a strengthening dollar will hit results in the second half of 2018.

IBM has been pivoting towards faster-growing cloud services as a way to turn its business around after several quarters of revenue declines. The company made $39.5 billion in revenue from businesses under its "strategic imperatives" over the last 12 months, it said.

IBM's net income fell to $2.69 billion from $2.73 billion a year earlier. On a per-share basis, earnings rose to $2.94 from $2.92 due to a lower number of outstanding shares.

Excluding one-time items, IBM earned $3.42 per share, while analysts had expected $3.40.

IBM shares fell to $139.21 in extended trading on Tuesday. The stock, a Dow component, has fallen about 8 percent this year.

(Reporting by Pushkala Aripaka in Bengaluru; Editing by Sai Sachin Ravikumar)

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