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IBM profit sinks 13% despite Watson gains

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International Business Machines Corp.’s profit fell 13% in the first quarter despite an improvement in the business unit featuring Watson artificial intelligence operations — an area Chief Executive Ginni Rometty is counting on to propel the company’s turnaround.

IBM said Tuesday that total revenue fell for the 20th consecutive quarter as it continues efforts to offset waning older businesses with younger ones that are growing at a rapid clip.

IBM shares fell 3.9% in after-hours trading. Shares closed Tuesday down 0.6% to $170.05.

The Armonk, N.Y., computing giant reported net income of $1.8 billion on $18.2 billion of revenue in the first quarter. It reported diluted earnings per share, excluding certain items, of $2.38, up from $2.35 in the comparable 2016 period. Analysts had expected earnings per share of $2.35 on $18.4 billion in revenue, according to a survey by Thomson Reuters.

“In the first quarter, both the IBM Cloud and our cognitive solutions again grew strongly, which fueled robust performance in our strategic imperatives,” Ms. Rometty said in a press release.

IBM’s legacy businesses — selling hardware, software, and services for traditional corporate computing facilities — have been shrinking as customers embrace cloud computing. The company has been building new revenue streams in higher-growth areas that it calls “strategic imperatives,” such as cloud computing, artificial intelligence, security, and mobile technology.

Platforms such as Watson, which offers of commands and functions that software developers can use to stitch artificial intelligence into their programs, are seen as potential revenue-building opportunities for Big Blue.

Write to Ted Greenwald at [email protected]



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