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IBM profits plummet to below Facebook levels—at least this quarter

In this file photo taken Jan. 13, 2011, the IBM logo is displayed. IBM Corp., reports quarterly financial results Monday, July 18, 2011, after the market close. (AP Photo/Seth Wenig, file)
AP Photo/Seth Wenig
Getting smaller to get bigger.
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The numbers: Bad. IBM said today it earned $18 million in the third quarter, down from $4 billion a year earlier. The loss reflects a charge of $4.7 billion including costs to the sale of the company’s unprofitable chip-making business to GlobalFoundaries. Revenue fell 4%, to $22.4 billion.

The takeaway: IBM cannot give its chip business away. The company is paying GlobalFoundaries, which is owned by the government of Abu Dhabi, $1.5 billion to take the unit.

What’s interesting: Intel has supplanted IBM as the dominant maker of semiconductors. (Facebook has eclipsed IBM in market capitalization, in something of a tech-related changing of the guard.) That leaves businesses such as providing software services online and data analysis, according to chief executive Ginni Rometty, who has mapped out a plan to move company into what she terms “higher value.” But the cloud can be crowded. Think Amazon, which pioneered providing cloud-computing services to corporate customers. Adding to IBM’s woes in the quarter: revenue from the company’s self-described growth markets, which include Brazil, India, Russia and China, tumbled 6%. In other words, IBM’s strategy doesn’t seem to be working.

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