Oct 17 IBM Corp's shares were set to
open 8 percent lower after a drop in hardware sales in the
latest quarter reinforced concerns about the company's ability
to grow as it shifts to software and cloud services.
International Business Machines Corp said on Wednesday
hardware revenue fell 17 percent in the third quarter and that
profitability in the business had declined by $1 billion so far
At least nine brokerages cut their price targets by as much
as 9.5 percent, while analysts at UBS Investment Research
downgraded the stock to "neutral" from "buy".
"We think IBM's market positioning mainly in infrastructure
with database and middleware is becoming riskier as customers
shift to the cloud," Societe Generale analysts wrote.
The world's largest technology services company reiterated
its full-year profit outlook, but analysts raised doubts about
the company's ability to convert services backlog to revenue.
IBM has reported a decline in revenue for six straight quarters.
"Software has been the growth engine for IBM and has been
one of the key reasons investors held the stock. However, it
appears that the engine may have stalled and no longer can
outgrow the broader software market," J.P. Morgan analysts said.
IBM has been beefing its software and cloud services
offerings through acquisitions. It bought website hosting
company SoftLayer Technologies in a deal valued at more than $2
billion in June and paid about $1 billion to buy
security-software maker Trusteer in August.
The J.P. Morgan analysts said IBM may just not have the
right software assets to address the faster-growing segments.
IBM's shares were trading at $172.69 before the bell on
Thursday. They closed at $186.73 on the New York Stock Exchange
(Reporting by Soham Chatterjee; Editing by)