IBM new rometty
IBM CEO Ginni Rometty is looking to transform Big Blue into a provider of business software for cloud, mobile, social and analytics. Reuters

The second quarter was another challenging one for IBM, as the computing giant looks to transition from a manufacturer of chips and hardware to a developer of cloud-based software for social, mobile and analytics applications. Revenues from continuing operations for the period ending June 30 fell 1 percent, excluding the effects of currency and businesses divestitures, to $20.8 billion. Analysts surveyed by Thomson Reuters were expecting revenues of $20.95

Non-GAAP net income from continuing operations was down 15 percent, to $3.8 billion, while earnings per share fell 13 percent, to $3.84. Analysts were expecting EPS of $3.78

Sales from computing hardware were off 32 percent year over year. IBM said the strong U.S. dollar hurt overseas sales.

Despite the lackluster numbers, IBM said it’s making progress in areas that are key to its future as a provider of software, including Watson, that helps businesses run more efficiently and make better decisions. Revenue from what the company has defined as strategic imperatives – cloud, analytics and engagement – was up 20 percent.

Ginny Rometty, now in her fourth year as IBM’s CEO, said in a statement that the results “demonstrate that we continue to transform our business to higher value and return value to shareholders. We expanded margins, continued to innovate across our portfolio and delivered strong growth in our strategic imperatives of cloud, analytics and engagement, which are becoming a significant part of our business.”

IBM shares (NYSE:IBM) were off more than 3 percent in after-hours trading Monday.