IBM cut its full-year consulting revenue growth forecast to 6%-8% from earlier expectations of high single-digit percentage growth. "We are seeing softness in certain components of our discretionary based offerings in consulting," Chief Financial Officer James Kavanaugh told Reuters about the U.S. market. IBM, which receives over 75% of its revenue from its software and consulting business units, said its consulting revenue rose 8.2% at constant currency to $4.96 billion in the quarter ended March 31. Software revenue rose about 6%. Both the segments saw growth in the mid-to-high teens last year.
Big Blue forecast annual revenue growth between 3% and 5% at constant currency, having said in January it expected revenue to rise at the lower-end of its mid-single-digit target. Analysts on average expect a 3.6% growth, according to Refinitiv data. IT industry majors including IBM and India's Tata Consultancy Services have flagged weakness in Europe. Accenture signaled to a wider slowdown last month, when it decided to slash about 19,000 jobs and trimmed revenue growth and profit forecasts.
TCS also said clients in the North American banking space deferred project spending amid the U.S. financial crisis.
Kavanaugh, however, said regional banks make up less than 1% of IBM's revenue in the United States.
IBM said revenue in the Americas rose only 1% at constant
currency in the first quarter, while it grew 8% in Europe. A
strong dollar also hurt the company by $110 million during the
quarter.
Total revenue in the first quarter rose 4.4% at constant
currency to $14.25 billion, compared with analysts' estimate of
$14.35 billion.
(Reporting by Chavi Mehta in Bengaluru; Editing by Krishna
Chandra Eluri)
