IBM revenues are running out as a server and software sales are slowing

(Reuters) – IBM Corp. Tuesday announced a decline in revenue greater than expected, penalized by a slowdown in software sales and a hesitant demand for mainframe servers.

CEO Ginni Rometty reorients International Business Machines Corp to faster-growing cloud computing and analytics services to reduce reliance on traditional hardware products and reverse declines turnover.

The company's overall sales, based in Armonk, New York, declined 2% in the third quarter ended September, with almost all of its operations not Wall Street turnover.

The turnover of its systems unit, which includes mainframe servers and data storage systems sold to large companies, has only increased by 1%, up from 25% in the previous quarter.

The z14 mainframe server sales growth, introduced about a year ago, has slowed down, as customers wait for new machines to launch before upgrading.

IBM's cognitive software industry, home to Watson's artificial intelligence platform, analytics and cybersecurity services, reported revenue of $ 4.15 billion, down 6% compared to the previous year.

Seasonal factors affecting software demand, such as transaction processing platforms, weighed on revenues, said James Kavanaugh, IBM's Chief Financial Officer, in an interview, adding that there were signs that demand was recovering.

"We have a good portfolio of transaction processing software at the dawn of the fourth quarter," he said.

IBM, which generates more than 60% of its revenue outside the United States, said a stronger dollar had also weighed on results.

The company said it has achieved $ 39.5 billion in business over the past 12 months due to its "strategic imperatives": high-growth businesses, including cloud computing services, distributed among its divisions.

Overall revenue dropped to $ 18.76 billion, not including analysts' average estimate of $ 19.10 billion, according to Refinitiv's I / B / E / S data.

Net income fell to $ 2.69 billion from $ 2.73 billion a year earlier. Per share, earnings increased from $ 2.92 to $ 2.94, due to fewer shares outstanding.

Excluding non-recurring items, IBM earned $ 3.42 per share, while analysts expected $ 3.40.

IBM shares fell 4.7% to $ 138.29 in prolonged trading. The Dow component has dropped about 8% this year.