IBM blames sales 'execution problem' for weak first quarter

IBM stumbled in the first quarter as economic uncertainty and a slide in its hardware business pulled profits and revenue down.

In the past, the company's cost-cutting discipline and a steady shift toward higher-profit offerings had enabled it to keep earnings steaming ahead, surpassing Wall Street's forecasts, even during the recession.

Revenue growth has long been modest, but nothing like the fall-off reported on Thursday for the first quarter, down 5 per cent to $US23.4 billion ($22.7 billion). Net income fell 1 per cent to $US3 billion.

"This is very uncharacteristic," said Toni Sacconaghi, an analyst at Sanford Bernstein. "We're seeing IBM struggle."

The question, analysts say, is whether the company is facing a temporary setback or whether its hardware business might be a drag on revenue and profits for a while.

IBM's chief financial officer, Mark Loughridge, said that the quarter had ended far weaker than it began, and some anticipated mainframe and software deals had failed to close. "We're not immune from the global economy," he said, but largely attributed the slump to a sales "execution problem".

IBM is the world's largest supplier of information technology - hardware, software and services - to corporations and government agencies and its results are watched as a guide to broader trends in business technology spending. The once-hot China market, Mr Loughridge said, grew by "a disappointing 1 per cent".