October 16, 2019 / 8:13 PM / 10 months ago

IBM beats profit estimates on cloud-computing growth

Oct 16 (Reuters) - International Business Machines Corp beat analysts' estimates for third-quarter profit on Wednesday, benefiting from growth in its high-margin cloud-computing business.

Revenue from the company's cloud services, which are driving IBM's pivot away from established businesses including mainframe servers, rose 11% to $5 billion in the third quarter ended Sept. 30.

Total revenue fell 3.9% to $18.03 billion, missing analysts' average estimate of $18.22 billion. Excluding the impact from currency and business divestitures, revenue dropped 0.6%.

The Armonk, New York-based technology services giant, which wrapped up the mega cloud merger with Linux maker Red Hat Inc earlier this year, has faced years of revenue declines in the process of shifting focus to the cloud from traditional business.

Ginni Rometty, IBM chief executive for more than seven years, has been able to steer the company towards fast-growing cloud-computing business and lower its dependence on its traditional hardware products, but not without a bumpy journey. The newer areas of focus have sometimes underwhelmed investors.

With the Red Hat deal, the company's biggest so far, IBM is looking to expand its subscription-based software offerings to counter falling software sales.

IBM's global technology services segment, the company's biggest, reported $6.70 billion in revenue, down 5.6% from a year earlier.

Net income fell to $1.67 billion, or $1.87 per share, from $2.69 billion, or $2.94 per share, a year earlier.

Excluding special items, the company earned $2.68 per share, 1 cent above analysts' expectation. (Reporting by Munsif Vengattil in Bengaluru; Editing by Maju Samuel)

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