IBM sales dip 12 percent despite lift from new mainframe

Revenue for the quarter ended March 31 was $19.6 billion, with profit down 5 percent to $2.4 billion, IBM announced Monday.

Two-thirds of the company's business comes from overseas, and the strong U.S. dollar weighed on its results. Without the currency impact, and adjusting for businesses that IBM recently sold off, revenue would have been flat from a year ago, CFO Martin Schroeter said on IBM's earnings call.

Like its rival Hewlett-Packard, IBM has been watching its business shrink for several quarters as customers spend less on expensive hardware and IT services and devote more to cloud computing and mobile.

HP is trying to address the problem by splitting itself into two companies, while IBM has been selling off divisions that produce little profit, like its x86 server division, and investing in areas where it hopes to find growth.

On Monday, it said revenue from those "strategic imperatives," which include the cloud, analytics and mobile, increased more than 20 percent from a year earlier. But it's not enough to offset declines elsewhere.

Even allowing for the currency effects, sales fell 2 percent in IBM's global services division, to $12.2 billion, and 2 percent in its software division, to $5.2 billion.

Its hardware unit got a lift from new products. Revenue from mainframes more than doubled from a year earlier, and even IBM's Power servers division reported some growth, Schroeter said. The company will finish rolling out its new Power 8 chip across all servers this quarter, he said.

Still, revenue from IBM's hardware division was down 23 percent from last year, to $1.7 billion.

IBM is investing heavily to catch up in other areas, including spending $3 billion to create a new Internet of Things division. It's also betting on new analytics services that use its powerful Watson supercomputer, and mobile services developed with Apple.

James Niccolai covers data centers and general technology news for IDG News Service. Follow James on Twitter at @jniccolai. James's e-mail address is james_niccolai@idg.com