The press release alone gets an "ouch" rating, and it smelled like left-over weakness from Infosys. But after listening to the conference call, the quarter was not as bad as the PR portrays.
There were three concerns that caused the miss.
1. Leadership changes in China caused a shift in business dynamic
2. Two deals that did not close before the quarter closed. (The call made many references to these deals. If they were closed w/in the quarter, there would not have been a miss.)
3. The yen decline effected about 7-10 cents eps because services revenue could not be hedged. (This was also an issue in Q4 2012, but that did not prevent IBM from crushing it.)
Conditions 1 and 3 may have caused management to take a more cautious look at expectations, and not raise the low-end eps guidance of $16.70.
If these three concerns were mitigated, IBM would have been great. But they did happen, and IBM didn't beat. These deals should be seen in Q2, and not sure when 1 and 3 would be resolved. (But I am not too concerned about the yen currency issue. If IBM executes, the currency conversion will not be an issue.)
On the plus side, IBM may look to unload their x\86 server business. (Lenovo says its in early talks. If its anything like their PC deal, it will work out well for both parties.)
If after hours action holds up, tomorrow will see IBM see a sizable decline, and appear to be a broken daily chart.
From a weekly perspective, the SMA trend may hold up if the high 190s hold.
Similar with the monthly data.
IBM's revenue and earnings (and eps) growth appear to be very much intact, and with continuous buybacks (of which $6 billion still remains), the down side may be limited to the 190s. A stock price of 195 would suggest a trailing multiple of 13.5.
Over the last two years, IBM's multiple has slowly been expanding that's to the steadily increasing eps and continuous financial engineering. Given that the conditions are still intact, the slowly expanding multiple should be as well. This should mean IBM's low-end trailing multiple to be near mid 13. A position after hours has almost allowed to happen.