IBM profit forecast, fourth-quarter revenue below estimates on falling demand for hardware

NEW YORK (Reuters) - International Business Machines posted a new 2015 profit target and quarterly revenue that both missed analysts' estimates, as it grapples with dwindling demand for servers and storage products.

Shares of the world's largest technology services company fell 1.8 per cent to US$154.01 in extended trading on Tuesday.

IBM forecast 2015 operating earnings of US$15.75 to US$16.50 per share, just shy of analysts' average estimate of US$16.51, according to Thomson Reuters I/B/E/S.

The company last year withdrew its long-term plan to hit US$20 per share in operating earnings for 2015, as it faltered in its move away from hardware to focus on higher-margin businesses such as security software and cloud services.

The company has been divesting underperforming businesses in an attempt to move into the new era of cloud computing, a struggle shared by other established technology leaders.

"IBM as well as other tech stalwarts such as Oracle , SAP, HP and Cisco face major headwinds as they adjust to this new cloud paradigm shift, which coupled with a cloudy IT spending environment have negatively impacted results," said Daniel Ives, an analyst at FBR Capital Markets.

SAP, Europe's largest software group, on Tuesday cut key profit forecasts and abandoned a target for higher margins, saying its stepped-up push to deliver products via the cloud would dampen profitability until at least 2018.

IBM's total revenue fell nearly 12 per cent to US$24.11 billion in the fourth quarter ended Dec. 31. Revenue from hardware fell 39 per cent to US$2.41 billion.

Net income fell to US$5.48 billion, or US$5.51 per share, from US$6.19 billion, or US$5.73 per share, a year earlier.

On an adjusted basis, the company earned US$5.81 per share.

Analysts on average were expecting a profit of US$5.41 per share on revenue of US$24.77 billion.

IBM shares closed at US$156.95 on the New York Stock Exchange on Tuesday.