Shares of the world's largest technology services company fell about 5 percent in after-market trading on Monday.
IBM is deep in transition, and has been selling businesses such as low-end servers, cash registers, and semiconductors to focus on high-growth areas like security software, cloud services and data analytics.
The company, which sold its x86 server business to Lenovo Group Ltd last year, has continued realigning its operations by paying contract-chipmaker Globalfoundries Inc to take over its loss-making semiconductor unit this month.
Revenue from what the company calls "strategic imperatives", which include cloud and mobile computing, data analytics, social and security software, rose about 20 percent, yet the new businesses have so far failed to make up for revenue lost to divestitures.
IBM said it expected third-quarter revenue to be the same as revenue from the first quarter, or about $19.6 billion (roughly Rs. 1,24,764 crores).
Revenue from its software business fell 10 percent to $5.8 billion (roughly Rs. 36,920 crores) from a year earlier.
Revenue from global technology services such as outsourcing fell 10 percent, hurt by weak discretionary IT spending by clients.
"Traditional software and services remain under pressure across IT, and we believe M&A remains one of the only glimmers of hope to restore growth back to these traditional tech giants that are starving for growth," Daniel Ives, an analyst at FBR Capital Markets, said.
Armonk, New York-based IBM's total revenue fell to $20.81 billion (roughly Rs. 1,32,467 crores) in the second quarter ended June 30, from $24.05 billion (roughly Rs. 1,53,091 crores) a year earlier, missing the average analyst estimate of $20.95 billion (roughly Rs. 1,33,358 crores), according to Thomson Reuters I/B/E/S.
IBM's quarterly results were also hurt by the strong dollar. The company, which gets more than half its revenue from overseas, said it expected a slightly greater currency impact in the second half of the year.
Consolidated net income dropped to $3.45 billion (roughly Rs. 21,961 crores), or $3.50 per share, for the second quarter, from $4.14 billion (roughly Rs. 26,353 crores), $4.12 per share, a year earlier.
Excluding items, IBM earned $3.84 per share, beating the average analyst estimate of a profit of $3.78.
Up to Monday's close of $173.22, the company's shares had risen about 8 percent this year.
© Thomson Reuters 2015
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