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IBM expects hardware business to grow in 2015

A worker is pictured behind a logo at the IBM stand on the CeBIT computer fair in Hanover February 26, 2011. REUTERS/Tobias Schwarz
A worker is pictured behind a logo at the IBM stand on the CeBIT computer fair in Hanover February 26, 2011. REUTERS/Tobias Schwarz

By Marina Lopes

NEW YORK (Reuters) - International Business Machines Corp said it expects its hardware sector to grow in 2015 as the company invests in research and development and divests low-performing ventures.

The comments come less than one month after the world's largest technology service company reported its lowest quarterly revenue in five years, weighed by sluggish global demand for its hardware, which plunged 23 percent in the first quarter of 2014.

The company added that growth in Latin America, the Middle East and Africa remain strong, and blamed falling revenue in China on government reforms affecting state-owned clients, and on the country's hardware-heavy portfolio.

"We move on and we spread ourselves out, more industries, more clients, cloud, data, et cetera, around there," said IBM Chief Executive Ginni Rometty at an investor briefing on Wednesday.

Chief Financial Officer Martin Schroeter said to stabilize the hardware sector IBM would continue to "refresh" hardware and further invest in research and development.

"Quite frankly, we are seeing very good growth out of software, good growth out of services, but challenges in hardware," said Schroeter. "We will stabilize that hardware base and I am comfortable we will make that happen in 2014," he said.

He reiterated the company's EPS target for 2015 of at least $20. He expects a shift to higher-value business to bring in $3.25 and share repurchases to add $2 in earnings per share by 2015.

Higher tax rates will cost IBM $1.50 per share as tax credits run out, he said.

(Reporting by Marina Lopes; Editing by Sofina Mirza-Reid and Eric Walsh)

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