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IBM profit falls on weak hardware sales, transition costs

Falling hardware sales and the cost of layoffs hit IBM’s profit hard in the first quarter, sending it down 21 percent from a year earlier.

Sales also fell, sliding 4 percent from last year’s first quarter to US$22.5 billion.

The quarterly results include an $870 million write-off for workforce rebalancing. Over the past few years, IBM has been cutting parts of its workforce as it shifts its focus to cloud and analytics services. Up to 6,000 IBM employees in the U.S. may be at risk of losing their jobs this year.

“In the first quarter, we continued to take actions to transform parts of the business and to shift aggressively to our strategic growth areas. ... As we move through 2014, we will begin to see the benefits from these actions,” IBM President and CEO Ginni Rometty said in a statement.

IBM made $2.4 billion in profit in the quarter, down from $3 billion a year earlier. Its earnings per share dropped to $2.29, down 15 percent.

Sales fell hardest in the Asia-Pacific region, declining by 12 percent to $5.0 billion. Revenue from the Americas totaled $9.6 billion, a decrease of 4 percent. Revenue in Europe, the Middle East and Africa rose by 4 percent to $7.6 billion.

The big drops in revenue came in the company’s hardware businesses, continuing a downward trend. Overall hardware sales fell by 23 percent to $2.4 billion. Revenue from the Systems and Technology segment slid by 23 percent from a year earlier, down to $2.4 billion for the quarter. System Z mainframe sales fell by 40 percent. Revenue from Power System servers was down 22 percent.

Revenue from IBM’s services business was also weak. Global Technology Services brought in $9.3 billion, down 3 percent. Global Business Services generated $4.5 billion, about the same as last year.

Software did slightly better for the company, generating $5.7 billion, up 2 percent from the same time a year earlier. Sales of IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were up 4 percent from the year-earlier quarter, to $3.7 billion.

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