Brett Molina

USA TODAY

The earnings pain might be just the beginning for Big Blue.

Tech bellwether IBM on Monday ditched a 2015 forecast calling for operating earnings per share of at least $20 and said it would dump its microchip unit as the company navigates a significant turnaround.

In a lackluster third quarter, IBM reported revenue of $22.4 billion and earnings per share of $3.68, both far short of Wall Street forecasts, according to analyst estimates compiled by Bloomberg.

Shares of IBM closed down 7.1% at $169.10 on Monday.

During a conference call Monday, IBM Chief Financial Officer Martin Schroeter cited weaker-than-expected software revenue and struggles in the services businesses.

"Obviously, we were disappointed in this quarter," said IBM CEO Virginia Rometty during the call.

IBM's disappointing earnings arrive as the company attempts to overhaul its business, something it was slow to start, says Moor Insights & Strategy founder Patrick Moorhead. "Once they recognized it, they just didn't do enough up front to start the turnaround," he says. "They hung around way too long."

The former PC giant has spent 2014 shedding old businesses in favor of new endeavors. On Monday, IBM announced a deal to hand over its semiconductor business to GlobalFoundries. According to terms of the deal, IBM will pay GlobalFoundries $1.5 billion in cash, and will take a pretax charge of $4.7 billion for the third quarter. IBM will maintain a stake in chip research.

In January, IBM sold a portion of its server business to Chinese company Lenovo for $2.3 billion. Ten years ago, Lenovo scooped up IBM's PC business, marking the end of an era for Big Blue.

FBR Capital Markets analyst Daniel Ives says while IBM is a "legendary tech stalwart" the company must focus less on past victories and look to its future.

The company must seek key tech partners and be more aggressive on acquisitions, he said, as the industry continues its shift toward mobile and the Internet cloud.

This year has generated signs of IBM's efforts. Over the summer, IBM announced an enterprise partnership with Apple. The companies are working on more than 100 business apps for the iPhone and iPad that will be available starting this fall.

Meanwhile, last week, IBM revealed a deal with software maker SAP where IBM will provide cloud infrastructure for SAP's lineup of business applications.

Then there's Watson, the cognitive computing technology that is "fundamentally IBM's biggest bet," says Moorhead.

Rometty says IBM is focusing more heavily on new areas, including cloud, data and analytics, social, mobile and security. "We've got to reinvent ourselves," Rometty said, "like the way we've done in prior generations."

Despite IBM's plans for an overhaul, it could be awhile before Wall Street regains confidence in Big Blue's financial potential. "Until IBM gets on track where they're showing financial progress, I think there is some cause to have concern," says Moorhead. "How many years is it going to take IBM to cross that chasm?"

Follow Brett Molina on Twitter: @brettmolina23.