IBM has top notch Q4

18-01-2008

by The Register

IBM did its best to calm fears of an imploding economy by posting strong fourth quarter results and issuing an optimistic take on the months to come.

The computing giant enjoyed a 10 percent (4 percent in constant currency) gain in revenue to USD28.9 billion. IBM also saw income rise 14 percent year-on-year to USD4 billion. Most of IBM's major businesses contributed to the gains, including a much stronger performance out of the services units. In addition, sales in "emerging economies" stood out, according to IBM CFO Mark Loughridge, speaking during a conference call.

"This turned out to be a great quarter," Loughridge said. "In fact, it's the strongest revenue and profit performance in almost a decade."

The IBM results arrive during an extended US financial markets slide. Even nervous investors, however, were pleased enough with IBM's figures to send shares higher more than 3 percent in after-hours trading, at the time of this report. (It should be noted that IBM reported preliminary figures for the quarter earlier in the week.)

Turning to individual businesses, IBM's Global Technology Services unit posted a 16 percent year-over-year rise in revenue to USD10 billion. Global Business Services rose as well by 17 percent to USD5 billion.

"This is the best (services) performance in years," Loughridge said.

IBM's Systems and Technology business, which includes server and storage hardware, dropped off by 4 percent to USD6.8 billion. Unix server and storage sales helped during the period, while mainframe sales came in below hopes, falling 15 percent. Microelectronics sales also failed to impress.

Loughridge believes that mainframe sales will improve in the next quarter when IBM unveils new hardware. The CFO revealed that the fresh mainframes will be announced and made available in late February.

In addition, Loughridge said that new low-end Power6-based servers will arrive by the end of the quarter along with new Unix virtualisation software.

Software sales rose 12 percent to USD6.3 billion, driven by middleware gains.

IBM's Global Financing group also pumped revenue by 8 percent to USD668 million.

For the full year, IBM's revenue rose 8 percent to USD98.8 billion. Meanwhile, income rose 11 percent to USD10.4 billion.

When asked about the rather troubling global economic conditions, Loughridge held onto his optimism. IBM expects to see 2008 gains from mainframes, Unix systems, software and services.

In addition, the company sees the current housing and credit crisis as quite different from the dotcom blowout.

"I think the risk and issues you might see will be different from the last downturn," Loughridge said. "The last downturn was really characterised by overcapacity. I don't see that being the issue as we go into 2008."

IBM expects earnings per share growth to hit at least 15 percent during 2008.

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