IBM falls as analysts question staying power of software rebound
IBM•IBM shares fell 6.5% in premarket trading as analysts said about $250 million of third-quarter software growth came from deals delayed from the prior quarter. IBM raised its annual software revenue growth outlook to about 7% to 8% but left its overall revenue growth forecast unchanged.
1. Delayed deals boosted growth
BofA Global Research analysts said about $250 million of IBM's software growth in the third quarter came from deals pushed out of the second quarter, making the improvement more modest without them.
2. Outlook and transaction processing
IBM now expects annual software revenue growth of about 7% to 8%, up from 6% to 8%, while keeping its overall revenue growth forecast unchanged. Revenue in its transaction processing unit grew 9% in the third quarter, but CEO Arvind Krishna said he expects a more “normalized performance, especially going into next year.” Bernstein said IBM's forecast suggests sales in the unit will dip slightly in the fourth quarter as the delayed-deal boost fades.
