IBM closed Tuesday with a decline of over 25%, marking its worst drop since at least 1968.
The stock logged its worst day on record, sinking further than its previous worst day of Oct. 19, 1987, when shares fell 23.7%. Records track trading activity back to 1968, though IBM has been a listed company on the New York Stock Exchange since 1916.
The tech company reported adjusted earnings of $2.93 a share on revenue of $17.2 billion, below analysts’ expectations for earnings of $3.01 a share and revenue of $17.86 billion, according to FactSet.
In a letter to investors, IMB CEO Arvind Krishna blamed the shortfall on weakness in the software and infrastructure business, as clients shifted spending toward hardware purchases such as memory chips.
“I want to spend some time explaining what we experienced in the quarter that led to the Software and Infrastructure performance shortfall you see above.
When we discussed our expectations with you in April, we noted that we would be wrapping on the launch of z17 in the second quarter. Given this was the strongest start to a mainframe program in our history, we expected Infrastructure revenue to decline low-single digits for the year, beginning this quarter. What played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in Transaction Processing. In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. This dynamic impacted client buying patterns. While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization. In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter.”
Krishna concluded, “While performance in the quarter was below our expectations, we have conviction in the strength of our portfolio and the strategic transformation of our business. To remedy challenges this quarter, we are undertaking new initiatives and accelerating others, all to improve our results going forward.”
In IBM’s previous quarter, the company’s software revenue increased by 11% to $7.05 billion.
IBM’s competitors are also struggling in the current market. Shares of Oracle are down 33% year-to-date, while Microsoft has declined 20%.
By CEO NA Editorial Staff
