International Business Machines (IBM) Stocks Down, Limits Gains on ECB Bets

International Business Machines Corp. (IBM)

International Business Machines Corp. (NYSE:IBM) shares declined 3.1 percent to $152.16, one day after reporting a weak quarterly result and a 2015 forecast that fell below estimates. The decline limited gains made by U.S. stocks on the Dow on news of stimulus from ECB (European Central Bank), but the blue-chip-index got a boost after UnitedHealth Group Inc. (NYSE:UNH) beat estimates for the quarter, driving its shares up as much as 3.5 percent. Market players are counting on stringent measures from central banks such as ECB in the face of deflation and a weak euro. According to Reuters, a source hinted that the ECB will buy $58 billion worth of bonds per month starting March to provide stimulus.

Before International Business Machines Corp. (NYSE:IBM) reported its fourth quarter results, analysts have expressed concern that the company will be in for a “messy quarter”, after posting a charge of $1.5 billion in the third quarter on its chip division. Fourth quarter revenue missed expectations of $24.77 billion at $24.1 billion, and earnings declined 4 percent as against last year, although beating estimates by 40 cents to $5.81 per share. Net income from operations was down 11 percent to $6.2 billion.

International Business Machines Corp. (IBM)While the company is transitioning itself from selling hardware towards the cloud business, observers note that it would mean a painful transition, due to the fact that cloud computing can limit demands for IBM’s servers and mainframes, exacting a heavy toll on its profits.“For 2015, specifically, we are dealing with some transitions in our business,” IBM chief financial officer Martin Schroeter said on a conference call with analysts. On the other hand, “It’s difficult to change the business model quickly,”  according to Daniel Ives, an analyst at FBR & Co., speaking of International Business Machines Corp. (NYSE:IBM)’s shift.

International Business Machines Corp. (NYSE:IBM) expects operating earnings of $15.75 to $16.50 per share for 2015. Analysts on average expects $15.17 to $18.55 per share, as per Bloomberg data.

This article has been written by Nonito Guntan.

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