? ? IBM reported a 4 per cent drop in third-quarter revenue, worse than expected by Wall Street, amid a decline in hardware and emerging markets even as it beat earnings estimates. Chief Financial Officer Mark Loughridge said on a conference call for investment analysts that third quarters tended to be difficult for the world's largest technology service provider but added the company faced some particular challenges this year. Profitability in its hardware business declined by $1 billion year-to-date and currency effects had a $500 million year-to-year negative impact, he added. There is increasingly less demand for hardware as software replaces traditional infrastructure. IBM has recognised that trend and is itself shifting to become a more software focused business. Hardware was mostly hit in China, which Loughridge said broadly accounted for about 5pc of IBM's business and about 40pc of that business was hardware.
China's growth has slowed this year, impacting corporate and public spending as the country develops an economic reform plan. "As far as the growth mar kets are concerned, we will be dealing with the China impact for another couple of quarters," Loughridge said. Revenue dropped 4pc to $23.7bn, below Wall Street analysts' expectations of $24.74bn, mainly due to the decline in its hardware division, excluding its System z mainframe servers, and in emerging markets, which were down 9pc. Hardware revenue was down 17pc, while System z mainframe revenue rose 6pc.
Quarterly net income rose 6pc to $4.0bn, or $3.99 a share on a non-GAAP basis from $3.62 a year earlier, above estimates of $3.96 a share. ? ?