* Growth markets units chief Bramante reassigned -source
* At least eight brokerages cut IBM share-price targets
* Shares fall as much as 7 percent
(Recasts with executive reshuffling)
By Soham Chatterjee and Edwin Chan
Oct 17 IBM Corp has reassigned the head
of its growth markets unit, a source with knowledge of the move
said, after a surprisingly steep drop in quarterly hardware
sales in China prompted a 7 percent share slide on Thursday.
James Bramante's reassignment was first flagged during the
company's conference call on Wednesday, when Chief Financial
Officer Mark Loughridge said sales chief Bruno Di Leo would be
taking over at the unit, which oversees growth markets for the
"They know how to get this done," Loughridge told analysts
on the call, referring to Di Leo and his team. "They helped
build this to begin with."
IBM declined to comment, and the source did not say where
Bramante would be reassigned.
The shakeup comes amid concerns that International Business
Machines Corp, which is moving steadily into higher-margin
businesses such as software and cloud computing, is struggling
to sustain growth through its emerging markets business.
The company reported a worse-than-expected 4 percent dip in
third-quarter revenue, its sixth straight quarterly decline.
Much of that came from a 17 percent slide in overall
hardware. Profitability in that business has declined by $1
billion so far this year.
At least eight brokerages cut their price targets on the
stock by as much as 9.5 percent to between $160 and $220, while
analysts at UBS Investment Research downgraded the stock to
"neutral" from "buy."
The latest quarterly disappointment deals another blow to
Chairman and CEO Ginni Rometty in her first year as head of the
board. Including Thursday's plunge, IBM's stock has dropped 15
percent since she stepped up as chairman compared with the S&P
500's 18 percent gain.
"We are concerned about future earnings power. IBM has been
successful in multiple computing waves in the past but we
believe the execution issues combined with the weak IT spending
environment will hold back any potential revenue growth," UBS
analysts said in a note to clients.
Loughridge blamed much of the revenue decline on China,
which accounts for about 5 percent of IBM's business. About 40
percent of that business is hardware. He said the country was
working on a nationwide economic reform plan ahead of a major
government plenary session in November, which depressed sales.
Much of China's corporate sector is dominated by the state
in a centrally planned economy, and government enterprises often
hold back on spending in the run-up to major nationwide policy
But he also admitted that about half of the decline was due
to "execution" issues, noting that Di Leo's appointment was
aimed at addressing a "leadership differential."
IBM shares closed down 6.4 percent at $174.83 on the New
York Stock Exchange after touching a two-year low of $172.57.
That marked their steepest one-day slide since April 19, also
triggered by disappointing sales.
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
in a note.
IBM, which sold its personal computer business to Lenovo
Group Ltd in 2005, has been shifting to a more
Talks with Lenovo earlier this year about selling off IBM's
low-end server business failed.
(Reporting by Soham Chatterjee and Edwin Chan; Editing by
Sriraj Kalluvila, Maju Samuel. Editing by Andre Grenon)