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Ginni Rometty
Cindy Ord | CNBC
IBM lowered its profit forecast for FY on Friday to take into account the acquisition of Red Hat, which was closed last month.
The reduced forecast reflects a $ 2.2 billion purchase accounting adjustment to recognize deferred revenue at par, as well as retention payments and earlier than expected completion of IBM's share repurchase.
IBM now expects earnings per share of at least $ 12.80 this year, excluding certain items, down from previous guidance of at least $ 13.90. IBM's shares rose immediately after issuing the new guidelines, but then lost their earnings.
The $ 34 billion transaction for Red Hat is the largest ever by IBM. With Red Hat, IBM can increase revenue by using the software to run applications in the public cloud, whether on Amazon Web Services, Microsoft Azure or IBM's own cloud.
IBM reiterated that Red Hat would increase profits in 2021.
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