By Michael Dabaie

 

International Business Machines Corp. (IBM) shares fell 6% to $133.50 in heavy morning volume.

The company Wednesday reported third-quarter revenue of $18 billion, down from $18.8 billion in the year-ago quarter. FactSet consensus was for $18.2 billion. IBM said revenue for Red Hat was up 19% normalized for historical comparability. IBM's acquisition of Red Hat closed in July.

Adjusted per-share earnings came to $2.68, ahead of the FactSet consensus for $2.66.

Global Technology Services, which includes infrastructure and cloud services and technology support services, revenue of $6.7 billion was down 5.6%, IBM said.

"The underperformance of the legacy software portfolio likely reflects some cannibalization from [Red Hat] as well as secular headwinds to their middleware and database products," Stifel analysts said in a note. Stifel rates IBM at Buy with a $169 price target.

Morgan Stanley said its unchanged $170 price target on IBM reflects lower core IBM growth and peer multiple, offset by faster Red hat growth and lower debt. Morgan Stanley rates the stock Overweight.

Nomura/Instinet said it cut its price target to $170. "IBM's [Global Technology Services] outsourcing unit fared materially worse in 3Q, which drags our 4Q and 2020 estimates lower," the Nomura/Instinet note said.

 

Write to Michael Dabaie at michael.dabaie@wsj.com

 

(END) Dow Jones Newswires

October 17, 2019 10:49 ET (14:49 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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