International Business Machines Corp reported a marked slowdown in business in September and abandoned its 2015 operating earnings target yesterday, as weak client spending and a slumping software sector weighed down quarterly revenue.

“We are disappointed in our performance,” said Ginni Rometty, IBM chairman, president and chief executive officer. “We saw a marked slowdown in September in client buying behaviour, and our results also point to the unprecedented pace of change in our industry.”

IBM, the world’s largest technology services company, is struggling to keep up with shifts in the industry as hardware becomes increasingly commoditised. The company, once best known for mainframe computers, has been pivoting to higher-margin businesses like security software and cloud services but growth in those areas has failed to offset weakness elsewhere.

IBM will divest low-performing businesses that will contribute almost $7bn in revenue this year and plans to continue getting out of those sectors, Rometty said.

Revenue from the company’s cloud service unit, which allows businesses to access software and data remotely, grew more than 50% in the quarter, while mobile revenue doubled.

Still, they were not enough to offset weakness in servers and routers, as well as some software business lines.

An appreciating US currency, which lowers the value of foreign revenue as reported in dollars, also weighed on earnings and will have a significant impact on profits in the fourth quarter and in 2015, chief financial officer Martin Schroeter said.

The company is also preparing to take a $300mn restructuring charge for “workforce restructuring” but did not specify how many employees would be affected.

IBM, which said it would announce a new operating earning per share target for 2015 in January, reported a 4% drop in third-quarter revenues as clients held back on spending in September.

Revenue fell to $22.4bn in the quarter from $23.34bn a year earlier. Analysts expected $23.37bn, according to Thomson Reuters I/B/E/S.

Net profit from continuing operations dropped to $3.46bn, or $3.46 per share, from $4.14bn, or $3.77 per share in the same quarter last year.

On an adjusted basis, the company earned $3.68 per share, missing the average analyst estimate of $4.31 per share.

IBM also said yesterday it will hive off its loss-making semiconductor unit to contract chipmaker Globalfoundries.

IBM will pay Silicon Valley-based Globalfoundries $1.5bn in cash over the next three years to take the chip operations off its hands, and took a pre-tax charge of $4.7bn in the quarter related to the deal.

 

Halliburton

Halliburton, the world’s No 2 oilfield services provider, said there were no signs of a slowdown in drilling activity despite the recent 25% fall in oil prices.

“We believe industry fundamentals suggest that these lower prices are not sustainable,” chief executive Dave Lesar said on a post-earnings call.

Oil supply and demand would be back in balance in a “relatively short period of time”, he said.

North American customers and national oil companies have not indicated that activity levels will slow down, Lesar said.

Halliburton said revenue in North America grew nearly 22% in the third quarter ended September 30, while operating income climbed 38%.

The company, which derives about half of its revenue from North America, also benefited from higher revenue in its international operations.

Halliburton’s revenue rose about 18% in the Middle East and Asia region — the highest increase among regions outside North America.

Net income attributable to the company rose 70% to $1.20bn, or $1.42 per share.

Excluding items, profit from continuing operations was $1.19 per share, higher than the average analyst estimate of $1.10 per share, according to Thomson Reuters I/B/E/S.

Revenue rose 16% to $8.70bn, beating the average analyst estimate of $8.53bn.

The company raised its quarterly dividend to 18¢ per share from 15¢.

Halliburton cut its loss contingency for the Macondo well blowout by $100mn during the third quarter. The company also recorded $95mn for an expected insurance recovery related to a $1.1bn settlement it reached last month for a majority of claims related to its role in the 2010 oil spill.

 

Valeant Pharma

Valeant Pharmaceuticals International said yesterday that it may raise its bid for Botox maker Allergan after the Canadian company posted a better-than-expected quarterly profit.

Valeant CEO Michael Pearson said a possible revised stock and cash bid would be worth more than $200 per share, assuming that Valeant’s stock rises, and would include more cash. The current bid is worth about $52.7bn or $176 per share.

Valeant’s third-quarter results were keenly anticipated for their potential impact on Valeant’s bid for Allergan, maker of anti-wrinkle injection Botox. Unlike most quarters in which, according to critics, one-time charges related to acquisitions obscure Valeant’s performance, the company made few deals as it stalked Allergan.

The company raised its full-year adjusted earnings forecast to $8.22-$8.32 per share from $7.90-$8.10 per share.

The company raised its fourth-quarter adjusted profit forecast to $2.45-$2.55 per share on expectations of double-digit same-store organic growth.

Analysts on average were expecting the company to earn $8.03 per share for the full year and $2.38 per share for the fourth quarter, according to Thomson Reuters I/B/E/S.

Valeant also raised its 2015 adjusted profit forecast to $10 per share from $9.65 per share. Analysts were expecting $9.58 per share.

Valeant posted a profit attributable to the company of $275.4mn, or 81¢ per share, in the third quarter, compared with a loss of $973.2mn, or $2.92 per share, a year earlier.

Cash earnings, or profit adjusted for one-time items, was $2.11 per share, above the average analyst estimate of $1.99 per share.

Revenue jumped 33% to $2.06bn, matching analysts’ expectations.

 

 

Electrolux

Global home appliances maker Electrolux struck a note of caution over its European business, predicting market growth at the low end of its forecast range after reporting slightly better than expected quarterly profit yesterday.

The Swedish group, vying for market leadership with US rival Whirlpool and China’s Haier, said it expected demand in Europe, which accounts for around a third of sales, to grow about 1% this year, at the bottom of its expectations for expansion of 1-3%.

“The market in Europe is weak. It is weaker than we would have anticipated at the beginning of the year,” chief executive Keith McLoughlin told a news conference.

Despite the weakness in Europe, years of plant closures and cost cuts in the region have helped to boost profitability, enabling Electrolux to report a better than expected 29% rise in earnings.

The group posted a third-quarter operating profit of 1.39bn Swedish crowns ($193mn), against an average forecast of 1.33bn crowns in a Reuters poll of analysts.

The company’s recent $3.3bn acquisition of General Electric’s appliances business will boost its returns from a resurgent US market in which industry-wide sales of the six top categories of home appliances are up 5% in the year to September.

McLoughlin said US market growth of 4-5% this year was a “reasonable forecast”, compared with the group’s previous forecast for growth of about 4%.

The European and North American markets each account for about a third of group sales, but sales growth in Europe has been more modest as the region’s economic recovery has faltered.

Growth prospects in Europe, not least in eurozone powerhouse Germany, have soured in recent months, leaving the outlook for sales of household appliances in greater doubt.

Electrolux, which sells under brands such as AEG and Zanussi as well as its own name, said that market conditions remained difficult and pointed to the recent weakening of leading indicators and consumer confidence in Europe.

 

Hasbro

Hasbro, the second-largest US toymaker, reported a 43% jump in quarterly profit, helped by higher demand for its Transformers, Marvel and Stars Wars action figures in emerging markets such as Latin America and the Asia Pacific region.

Hasbro owns the popular “Transformers” brand and holds toy licenses for Marvel Comics characters such as Spider-Man and Iron Man, which have had phenomenal box office success over the past few years.

Sales of boys’ toys, Hasbro’s largest business, rose 22% to $478.5mn, helped by higher sales of Nerf guns.

International segment revenue rose 11% to $649.3mn, helped by 29% growth in sales from emerging markets, the company said in a statement.

Hasbro’s US and Canada sales, which account for more than half of total revenue, rose 4% to $764.3mn.

Net income attributable to Hasbro rose to $180.5mn, or $1.40 per share, in third quarter ended Sept. 28, from $126.6mn, or 96 cents per share, a year earlier. Excluding items, Hasbro earned $1.46 per share.

Total revenue rose 7.3% to $1.47bn.

Analysts on average had expected a profit of $1.45 per share on revenue of $1.47bn, according to Thomson Reuters I/B/E/S.