IBM Revenue Lower than Expected, Downplays Sun Deal

Paul Lilly

It's turning out to be a rough month for IBM, who in recent weeks looked like it was going to acquire Sun Microsystems for $7 billion, but lost out to Oracle once takeover talks between big blue and Sun broke down. Had the deal gone through, IBM and Sun would have accounted for about 65 percent of the market for server computers running Unix and 42 percent of the total server market. And maybe better revenue numbers.

Instead, IBM posted an 11 percent drop in its quarterly revenue at $21.7 billion, which was less than Wall Street was expecting, who had forecast $22.6 billion. Net profit for the quarter also dropped 1 percent to $2.3 billion from $2.32 billion one year ago, however this was viewed more of a postive as Wall Street had been expecting a bigger drop in profits.

"These were decent results in light of the challenging economy. Certainly the top line is being impacted by the weak economy," said Andy Miedler , analyst at Edward Jones.

Despite the drop in revenue, IBM has been holding together well when compared to other technology companies. This can be attributed to putting a greater focus on software and services, resulting in a more profitable revenue mix than it had once been. And according to IBM, the company's full-year profit outlook is ahead of pace.

As for losing out to Oracle on the Sun deal, IBM's Chief Financial Officer Mark Loughridge said, "We've been competing with Sun, we know Oracle inside out. They now have the same address and same mail box, but we're talking about the same team that we've been competing against for some time and winning on the field."

Image Credit: IBM

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