IBM misses memo on economic slowdown

18-07-2008

by The Register

IBM has yet again shrugged off the global economic slowdown with second quarter profits leaping 22 percent and revenues rising.

Although improvements were reported across most operations, IBM's bread-and-butter services division was the star of the show.

"I've got to say that this is one of the best quarters I've ever seen," said CFO Mark Loughridge, during the companies quarterly investor conference call.

Net income for the quarter was USD2.77 billion, up from USD2.26 billion a year earlier. Total revenues rose 13 percent year-over-year to USD26.8 billion.

Revenues from software were USD5.6 billion, an increase of 17 percent over least year. Systems and Technology revenues were USD5.2 billion, up 2 percent year-over-year. IBM said the hardware buzz was driven by double-digit growth in mainframes, Unix servers and storage.

"We entered the second quarter with a strong deal pipeline, and this quarter, frankly, we were sold out," said Loughridge. "Performance was particularly strong in the Americas and Europe, as well as in the financial services sector."

Total global services revenue grew 16 percent. Breaking that down: tech services revenue was USD10.1 billion with significant growth reported from existing clients, while business services revenues increased 18 percent to USD5.1 billion.

OEM revenues were USD706 million, down 17 percent compared with the second quarter of 2007. Sales in IBM's new growth markets organisation increased 21 percent, and represented 18 percent of geographical revenues.

Big Blue's heavy investments in emerging markets helped avoid the economic malaise in the US and Europe. The company gets about two-thirds of its revenues from overseas sources.

Revenues in the Americas were up 8 percent at USD10.9 billion. Europe/Middle East/Africa rose 20 percent to USD9.8 billion. Asia-Pacific revenues increased 16 percent to USD5.3 billion.

"IBM had an outstanding quarter and a strong first half for 2008. These results demonstrate that IBM has the ability to thrive in both emerging and established markets. Once again, IBMers performed very well around the world," said CEO Samuel Palmisano in a statement.

The company also had a cheery outlook for the rest of 2008, restating its goal to boost annual profits to as much as USD11 a share by 2010 by cutting costs in the company's pension plan and continuing to emphasise growth outside of the US.

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