IBM’s First Earnings Miss in Eight Years Is Red Flag for the Rest of the IT Industry
It’s a rare thing for the computing and tech services giant IBM to miss the consensus expectation when it reports quarterly earnings. If Big Blue can’t hit its numbers, the thinking goes, it’s probably bad news for much of the IT industry.
That’s the conclusion of Chris Whitmore, an analyst with Deutsche Bank Securities, in the wake of yesterday’s earnings report. “IBM hasn’t missed consensus earnings expectations for eight years which raises the specter of increased macro risk and substantially weaker IT hardware spending,” he wrote in a note to clients today.
IBM is better than most at managing sales that turn south in one part of its business, but still able to make its numbers, he writes. That it wasn’t able to do so this quarter “raises a red flag” for other tech companies, especially those that sell a lot of hardware, including Hewlett-Packard, Dell, NetApp and EMC. “The IBM miss is a decidedly negative read through for the entire IT hardware segment and we are incrementally more cautious on the sector,” Whitmore wrote.
Expect a lot of attention on IT spending trends in the coming weeks, as other large IT companies get ready to report their results. The next big indicator will be when EMC reports quarterly results next week. HP, Dell and NetApp all report results in mid-May.