Declining hardware sales and expensive layoffs hurt IBM's bottom line
It was another rough quarter for IBM, which reported a drop in revenue. That marks eight quarters in a row of revenue declines. For the first quarter of 2014, IBM's total revenues reached $22.5 billion, down 4 percent from the first quarter of 2013. On the plus side, IBM is still making a profit -- $2.4 billion in Q1 2014, though even that figure is marred by the fact that it's down 21 percent year-over-year.
Part of the reason why the numbers are down this time around is because of IBM's recent layoffs. The company took an $870 million "workforce rebalancing charge" as it makes changes and reductions to staff that it hopes will pay off in the long run.
IBM's bottom line was also affected by a drop in hardware revenue. The company's Systems and Technology segment totaled $2.4 billion for the quarter, down 23 percent compared to the same quarter a year ago. Total systems revenues decreased 24 percent, including a 40 percent reduction in revenues from its System z mainframe server products.
"In the first quarter, we continued to take actions to transform parts of the business and to shift aggressively to our strategic growth areas including cloud, big data analytics, social, mobile and security," said Ginni Rometty, IBM chairman, president and chief executive officer. "As we move through 2014, we will begin to see the benefits from these actions. Over the long term, they will position us to drive growth and higher value for our clients."
IBM benefited from a bump in software sales. The company's Software segment generated $5.7 billion in Q1, up 2 percent year-over-year. Revenues from IBM's middleware products jumped 4 percent to $3.7 billion. Included in that is a 12 percent year-over-year jump in WebSphere sales.