IBM delivers big earnings in fourth quarter, upbeat about 2011

Summary:Software and mainframe sales powered IBM's fourth quarter as results topped estimates across the board.

IBM on Tuesday reported better-than-expected fourth quarter earnings across the board led by software and hardware system sales.

The company reported fourth quarter net income of $5.3 billion, or $4.18 a share, on revenue of $29 billion, up 7 percent from a year ago. Wall Street was looking for earnings of $4.08 a share on revenue of $28.3 billion for the fourth quarter.

In a statement, IBM CEO Sam Palmisano said the company has shifted to its "high-value businesses." That statement reflects how software is becoming an increasingly large chunk of IBM's revenue. IBM also reiterated that it will have operating earnings of at least $20 a share in 2015.

For 2010, IBM reported earnings of $14.8 billion, or $11.52 a share on revenue of $99.9 billion, up 4 percent from a year ago. Those results handily topped Wall Street estimates.

Big Blue's outlook was also strong. IBM said that it expects 2011 earnings to be $12.56 a share. Non-GAAP earnings will be at least $13 a share.

On a conference call, IBM CFO Mark Loughridge said that the company had its best revenue growth quarter in a decade. "We worked on our cost and expense structure, continuing to globalize our business. We continued to improve our mix of business, and we generated a lot of cash, which allowed us to acquire key capabilities," said Loughridge. He added that IBM's business model is resilient.

Loughridge added:

  • 21 percent of IBM's revenue comes from growth markets.
  • Services backlog was $142 billion.
  • "The combined revenue in the BRICs was up 17% with growth in each of the four countries, and particularly strong growth in China, which was up 25%, and Russia, up 46%."
  • IBM has 7,800 dedicated consultants in its business analytics practice.

Here's a look at how the fourth quarter results break down:

Software revenue in the fourth quarter was $7 billion, up 7 percent from a year ago. Operating income was $3.2 billion. Middleware software shined with revenue of $4.7 billion, up 13 percent from a year ago. WebSphere revenue was up 32 percent from a year ago.

Global services revenue was up 2 percent overall. Technology services revenue was up 1 percent from a year ago to $10.2 billion. Business services revenue was up 4 percent from a year ago to $4.8 billion.

Hardware revenue was led by new mainframes. IBM said systems and technology revenue was $6.3 billion, up 21 percent from a year ago. Operating income was $1.2 billion, up 45 percent.

Topics: Enterprise Software, Banking, IBM


Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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