Shareholders of IBM took a beating Wednesday morning, losing more than $9 billion in market cap after the company reported quarterly earnings that fell short of analysts’ expectations in some areas after the close of trading Tuesday.
IBM's stock dipped more than 5% in pre-market trading and inched a bit lower after the opening bell, lowering its market cap to $150.2 billion. Although the company reported adjusted earnings per share of $2.38, which beat Thomson Reuters analysts’ expectations of $2.35, IBM missed on revenue. The company posted just $18.2 billion in sales, falling short of the $18.4 billion that had been predicted.
The revenue figures marked a 3% decline from a year ago, which pushed the company’s streak of year-over-year revenue declines to 20 consecutive quarters. IBM's revenue numbers marked its first "miss" of analyst expectations in 5 quarters.
IBM’s revenue figures have been suffering over the last few years as the company has struggled to keep up with the changing demands of its customers. The company has been transitioning away from hardware and software, instead promoting the growth of its cloud computing division, as well as beefing up its security offerings and its big data analytic capabilities, including those involving its IBM Watson platform.
The moves have worked, to a certain extent, in restoring investor confidence. While Wednesday’s price drop is part of a larger two-month slide for IBM, the company had seen its stock price jump more than 55% between February 2016 and this February, topping out at over $182.
Warren Buffett's Berkshire Hathaway holding company, which holds 81.2 million shares of IBM, according to its latest regulatory filing, lost around $770 million on Wednesday morning. Buffett, who was enticed by IBM in part because of its dividends, hasn’t seen his bet on IBM pay off as he had hoped.
But his foray into IBM hasn’t exactly flopped, either. The company disclosed in its earnings report that it gave back $2.6 billion to shareholders through dividends and buybacks during the first quarter. The average purchase price for Buffett’s shares was $170.43, above the level where the stock traded midday Wednesday. But given the dividends the company has been consistently doling out, it’s quite possible his bet on the company is still in the black.