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IBM revenues hurt by poor hardware performance in China, its ‘nexus of erosion’

Image Credit: Kansir/Flickr

IBM reported its third quarter earnings for 2013, with investors watching closely to see whether the business model is stabilizing.

IBM has missed its revenue estimates for seven straight quarters, which has caused concern among investors and analysts that its business is deteriorating. The company said its software revenue came in at $5.8 billion, shy of the $6 billion level analysts were expecting. Revenue dropped 4 percent to $23.7 billion below average analysts expectations of $24.74 billion.

In the press release, IBM’s chief executive Ginny Rometty acknowledged that revenue “fell short.” She added, “We are taking action to improve execution in our growth markets unit and in the elements of our hardware businesses that are under performing.”

IBM now offers a suite of hardware and software services and competes in an increasingly competitive market.

In major markets like the U.S. and Western Europe, IBM reports that it’s performing well — particularly its software business unit. However, the company admits that it can certainly do better when it comes to its initiatives in growth markets. Performance in China was particularly poor; it’s down 5 percent this quarter, with most of the decline attributed to hardware. On an earnings call this afternoon, IBM’s chief financial officer Mark Loughridge referred to this market as a “nexus of erosion.”

IBM has stressed that we should expect to see a stronger performance in the fourth quarter of the year. IBM typically sees a “difficult third, followed by a stronger fourth,” said Loughridge.