- IBM's Chinese sales fell 22% Y/Y in Q3 and its hardware sales within the country dove 40%, management disclosed on the CC. The latter accounted for 5% of the 9% revenue drop seen for "growth markets" during Q3. A demand rebound isn't expected until after Q1 2014, as local firms wait for economic reform plans to be announced.
- Talking about growth market weakness in general, IBM admits only half of its challenges stem from business conditions; the rest are execution-related.
- "We see a pattern...," said Bernstein's Toni Sacconaghi in a pointed question. With IBM having seen six straight quarters of revenue declines, Sacconaghi wonders if Big Blue should model for 0% rev. growth going forward. Management gave a list of reasons why a return to growth was possible, including a healthy services backlog (+6% Y/Y in Q3 exc. forex).
- Power systems (UNIX server) sales plunged 38% Y/Y in Q3, worse than Q2's 25%. System x (x86 servers) fell 18%, storage hardware 11%. System z (mainframes) rose 6%, aided by an upgrade cycle. Chips +1%.
- One bright spot: cloud-related revenue topped $1B, with $460M coming from cloud services (a chunk of which likely comes from SoftLayer).
- Q3 free cash flow (exc. financing receivables) was $2.2B, down $900M Y/Y and well below net income of $4.4B. IBM ended the quarter with $12.3B in cash/investments and $10.3B in non-global financing debt.
- IBM now -5.9% AH. Q3 results, guidance/details.