China Connection Proves Costly For International Business Machines Corp (NYSE:IBM)

Posted by Nathan Alexander October 18, 2013 0 Comment 831 views

International Business Machines Corp (NYSE:IBM) reported a dip of 4% in its Q3 revenue which was way below analyst projections. The main reason cited was the drop in the hardware segment and in the emerging markets. Mark Loughridge, the company’s CFO said currency changes had a negative impact of $500M y-t-d. The emerging trend is that people opt for software against conventional infrastructure and the company is now gearing-up to move into software mode.

The hardware hit came mainly from China. The CFO said that this emerging market accounted for around 5% of the company’s business. He said that approximately 40% of the business from China came from hardware. There has been a definite slowdown in growth in China which had had an adverse impact on public and corporate spending. The company’s revenue dropped 4% to $23.7 billion. This was below the average analysts’ estimates of $24.74B.

The Microsoft-Nokia story

The China connection is very much in the limelight, not just with International Business Machines Corp (NYSE:IBM), but with another technology biggie, Microsoft Corporation (NASDAQ:MSFT). There was news that Steve Ballmer was in Beijing to meet up with Nokia and Stephen Elop. Finalization and approval of the deal between the 2 companies is still pending but they both are gearing towards more involved talks.

Critical market

China is a very important market for Microsoft Corporation (NASDAQ:MSFT) and Nokia alike. The consumer market in the country is no doubt competitive, but also because Nokia’s regional office, R&D centers and factories are in China. Once the Microsoft Corporation (NASDAQ:MSFT), Nokia deal is finalized, there is bound to be an integration of the departments and teams into the former’s operations. The buildings, assets and a lot more will also be eventually integrated. Though there is no distinct and confirmed news yet, these are a few of the things that are on the horizon.

About Nathan Alexander

Nathan Alexander holds bachelor’s degrees in Journalism and European Studies from Boston University. Nathan reports round up the day’s business and financial market news and include keynote interviews with major business players and updates on Asian, European and US stock markets. He has interviewed heads of leading European banking institutions such as European Central Bank President Jean-Claude Trichet and HSBC Chairman Stephen Green, and CEOs from the business world including Microsoft founder Bill Gates, Virgin Chairman Sir Richard Branson and former Porsche President and CEO Dr Wendelin Wiedeking.

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