IBM stunned Wall Street today by warning of a massive first-quarter revenue and earnings shortfall, which it blamed on technology spending cutbacks by corporate customers, causing a sharp drop in its stock.
The warning - the first in more than a decade for IBM - quickly sent waves of selling in equity markets around the world as the London and European stock exchanges fell sharply.
IBM shares opened down almost 10 per cent in heavy volume. It was trading off $9.25 at $88 after closing Friday on the New York Stock Exchange at $97.25. In the first 30 minutes of trading, over 6 million IBM shares traded hands.
The warning comes on the back of increased scrutiny of IBM's accounting, which investors have said doesn't provide enough information.
The company attributed the shortfall in part to its technology group, which makes items such as microchips for other companies. It said it expects that group's revenue to fall 35 per cent, hitting its profit by $200 million before taxes, or 8 cents per share.
IBM said the company expected first-quarter revenue in the range of $18.4 billion to $18.6 billion compared with $21.0 billion a year ago.