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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
FILE PHOTO: A logo of IBM is seen at the Mobile World Congress in Barcelona, Spain February 28, 2018. REUTERS/Yves Herman/File Photo   -   Copyright  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.

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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