IBM disappoints, but something had to give

Pisani's market open: IBM miss weighs on Dow

IBM with a big miss, and abandons its 5-year plan for $20 in earnings by 2015.

A big miss: $3.68 versus expectations of $4.31, $22.37 billion in revenues versus expectations of $23.36 billion.

Read MoreIBM on earnings: We're disappointed

Ginni Rometty said in a statement: "We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry."

Ginni Rometty, CEO of IBM
Adam Jeffery | CNBC

True, they divesting their semiconductor manufacturing business to Globalfoundries because they cannot afford the tremendous update in technology it will take to keep it relevant.

But this miss excludes $0.22 of charges.

Revenue was down across the board, not just in hardware.

Look at the trends:

ibm trends CHART 141020 EC

Global Bus. Servicesdown 2% (consulting)
Softwaredown 2%

Down by regions as well: Americas down 2 percent; Europe/MiddleEast/Africa down 2 percent; and Asia/Pacific down 9 percent.

IBM gets 65 percent of its revenues outside the U.S.

In retrospect, something had to snap. IBM had a problem: Its earnings expectations were rising, while its revenue was falling.

Look at rising revenue and rising expectations for revenue:

ibm earns CHART 141020 EC

2014 (est)$17.90

Now look at the declining revenue:

ibm revs CHART 141020 EC

2014 (est)$97.4

Something had to give, no? Little wonder it abandoned its $20 earnings target for 2015.


1) Oil services giant Halliburton beat estimates by nine cents, and its revenue also exceeded estimates. Halliburton also announced a 20 percent increase in its quarterly dividend to 18 cents per share.

2) NCR Corp. is down big as it announced Q3 preliminary results below expectations. The company primarily makes automated teller machines and point-of-sale terminals. The company blamed a weaker retail environment, so their customers...the retailers...delayed buying terminals. They also noted data security concerns were causing retailers to shift IT priorities.

3) VF Corp. (Lee, Wrangler jeans, Nautica, etc.) missed, but raises 2014 EPS to $3.08 from $3.06 ($3.09 consensus); and raised quarterly dividend by 22 percent to $0.32.