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IBM earnings beat estimates on cloud strength; shares up 6%

Credit: REUTERS/LOREN ELLIOTT

International Business Machines Corp posted second-quarter revenue and profit that beat analysts' estimates on Monday, riding on the strength of its high-margin cloud computing business, sending its shares up 6%.

Adds CFO quotes, share movement

July 20 (Reuters) - International Business Machines Corp IBM.N posted second-quarter revenue and profit that beat analysts' estimates on Monday, riding on the strength of its high-margin cloud computing business, sending its shares up 6%.

IBM has jettisoned some of its legacy business to focus on cloud computing, an area that has seen a lot of action in recent years as companies ramp up their digital shift to control costs and boost efficiency.

Revenue from the cloud business, previously headed by IBM's new boss Arvind Krishna, rose 30%to $6.3 billion.

Krishna took over as chief executive officer from Ginni Rometty in April, while appointing former Bank of America Corp's BAC.N top technology executive Howard Boville as the new head of IBM's cloud business.

"As we got into the latter half of the second quarter, we saw a marked inflection in clients' acceleration to digital transformation and cloud. And you saw that play out in our cloud performance, which was up very nicely," Chief Financial Officer James Kavanaugh told Reuters.

IBM's global business services unit was impacted as clients cut or delayed spending on discretionary projects due to COVID-19, Kavanaugh said. Sales in the unit fell 7% to $3.9 billion.

While Western Europe and Asia Pacific showed a pickup in client spending during June, U.S. and Latin America customers pulled back as the pandemic impact got worse, Kavanaugh said.

IBM's total revenue fell 5.4% to $18.12 billion in the quarter, but came in above analysts' estimates of $17.72 billion, according to IBES data from Refinitiv. Excluding the impact from currency and business divestitures, revenue declined 1.9%.

The company's net income fell to $1.36 billion, or $1.52 per share, in the quarter ended June 30 from $2.5 billion, or $2.81 per share, a year earlier.

Excluding items, the company earned $2.18 per share, above estimates of $2.07 per share.

(Reporting by Munsif Vengattil in Bengaluru: Editing by Maju Samuel)

((munsif.vengattil@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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