Summary
- Q1 revenues fell well short of estimates.
- Currency issues were well known here.
- Situation shows importance of Red Hat deal.
Shares of technology giant IBM (IBM) are one of Wednesday's losers so far after the company announced its first-quarter earnings yesterday afternoon. This was the third straight revenue miss for the company, as the top line continues to be an issue. As this work in progress continues, investors are left waiting for the important Red Hat (NYSE:RHT) deal to close later this year.
For the quarter, total revenues came in at $18.18 billion, which missed Street estimates by $330 million. This miss is even worse when you consider that after the previous quarter's miss, the Street average came down by $230 million in between reports. While IBM did beat by a penny on the bottom line, this was the smallest beat going back to late 2017's earnings misses.
Now I'm sure the bulls will blame the issue on a strengthening dollar, but I don't see this as an appropriate excuse. Anyone that has followed the Dollar Currency Index ("DCI") knows that the US dollar was up considerably over the prior-year period. Also, the DCI's strength since IBM's previous report shouldn't have been enough to cause this size of revenue miss, especially considering reduced expectations. Additionally, management mentioned on the conference call how the stronger dollar reduced expenses and improved other income items due to hedging benefits.
