TMCnet News
IBM Profit Declines, To Sell Microelectronics Business To Globalfoundries(dpa-AFX International Compact Via Acquire Media NewsEdge) ARMONK (dpa-AFX) - International Business Machines Corp. (IBM) Monday reported a sharp decline in profit for the third quarter, hurt by a charge related to the sale of its Microelectronics business to Globalfoundries, which was also announced today. Earnings from continuing operations also declined, amid slowdown in client buying behavior in September. The stock plunged around 7 percent in pre-market activity. IBM also announced separately the sale of its Microelectronics business to Globalfoundries, an investment arm of the government of Abu Dhabi, for a cash consideration of $1.5 billion to Globalfoundries, that will be adjusted against working capital. Ginni Rometty, IBM chairman, president and CEO, said, "We are disappointed in our performance. We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry. While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas - cloud, data and analytics, security, social and mobile - where we continue to shift our business. We will accelerate this transformation." Net income plunged to $18 million or $0.02 per share from $4.041 billion or $3.70 per share in the previous year. The latest results included a net loss from discontinued operations of $3.4 billion or $3.44 per share. Earnings from continuing operations declined to $3.46 from last year's $3.77. Operating earnings from continuing operations were $3.68 per share, compared to $4.08 per share in the third-quarter of 2013. On average, 19 analysts polled by Thomson Reuters expected earnings of $4.32 per share. Analysts' estimates typically exclude special items. Total revenue from continuing operations declined to $22.397 billion from $23.338 billion last year. Analysts expected revenues of $23.37 billion. Global Services segment revenues decreased 3 percent to $13.7 billion, and revenues from the Software segment slid 2 percent to $5.7 billion. Global Financing segment revenues decreased 3 percent in the quarter to $487 million. Meanwhile, revenues from continuing operations from the Systems and Technology segment declined 15 percent to $2.4 billion. Geographically, the Americas' third-quarter revenues fell 2 percent to $10.1 billion, while revenues from Europe/Middle East/Africa also slipped 2 percent to $7.2 billion. Asia-Pacific revenues decreased 9 percent to $5 billion. Revenues from IBM's growth markets were down 6 percent. Revenues in the BRIC countries - Brazil, Russia, India and China - dropped 7 percent from last year. Separately, IBM and Globalfoundries said they have signed a definitive agreement for Globalfoundries to acquire IBM's global commercial semiconductor technology business, including intellectual property, world-class technologists and technologies related to IBM Microelectronics. The cash consideration for the deal, to be paid by IBM over the next three years, is $1.5 billion. This will be adjusted by the amount of working capital which is estimated to be $200 million. Globalfoundries will also become IBM's exclusive server processor semiconductor technology provider for 22 nanometer or nm, 14nm and 10nm semiconductors for the next 10 years. The transaction is expected to close in 2015. The agreement, when closed, will enable IBM to further focus on fundamental semiconductor research and the development of future cloud, mobile, big data analytics, and secure transaction-optimized systems. IBM, which closed up 1.2 percent at $182.05 on Friday, fell 6.9 percent in pre-market trading. Copyright RTT News/dpa-AFX |