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IBM revenues do not meet estimates due to weakness of the managed infrastructure unit

Por Chavi Mehta

Oct 20 (Reuters) – IBM missed market estimates for quarterly revenue on Wednesday as its managed infrastructure business suffered a decline in orders ahead of a spin-off next month, sending its shares down 4. % in post-closing transactions.

The small-margin unit provides technical support to IBM customers and has shrunk in recent years as companies move to the cloud, becoming a drag on so-called “Big Blue” profits.

“As we published the effective date for the spin-off of our managed infrastructure business, our clients halted all project activities at the end of September and that shocked us,” CFO James Kavanaugh said in an interview.

Revenue in the global technology services unit, which will house the company to be called Kyndryl after the spin-off, fell 4.8% to $ 6.15 billion in the third quarter ending Sept. 30.

Kavanaugh also said that demand fell in the company’s systems business, home of IBM computers, causing a 12% decline in the unit’s revenue.

The business slowdown has prompted the 110-year-old IBM to shift its focus to the cloud, an area where it sees a $ 1 trillion market opportunity to drive growth and better compete with Amazon.com Inc and Microsoft Corp. .

IBM’s revenue adjusted for the Kyndryl spin-off was 2.5% higher, helped in part by increased demand for its consulting services from companies that digitized their operations during the COVID-19 pandemic.

Total revenue increased marginally to $ 17.62 billion, missing the average analyst estimate of $ 17.77 billion, according to Refinitiv data.

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