Big Blue delivers big profits; Ups 2008 outlook

IBM on Wednesday handily topped Wall Street estimates with net income of $2.3 billion, or $1.
Written by Larry Dignan, Contributor

IBM on Wednesday handily topped Wall Street estimates with net income of $2.3 billion, or $1.65 a share, on revenue of $24.5 billion.

According to Thomson Financial, Wall Street was expecting a profit of $1.45 a share on revenue of $23.7 billion. IBM got help from a weak dollar relative to international currencies, but the quarter was still impressive. But it must be a thing of beauty to take in revenue in euros and convert it into the lowly dollar.

Earnings (statement, all resources) from continuing operations were up 36 percent from a year ago and revenue was up 11 percent (4 percent assuming a constant currency rate). In a statement, IBM CEO Samuel Palmisano said the company is positioned well with international diversification and recurring revenue businesses. More importantly, Palmisano said: "We feel good about the rest of the year."

On a conference call, IBM CFO Mark Loughridge said companies are prioritizing IT projects based on efficiency and cost savings. Loughridge also raised IBM's 2008 earnings guidance to $8.50 a share, 25 cents better than Wall Street estimates.

By the numbers for the first quarter:

  • IBM's Americas revenue was $9.9 billion, up 8 percent from a year ago. Revenue from Europe/Middle East/Africa was $8.8 billion, up 16 percent from a year ago. Here's where the weak dollar helps IBM, which would have posted a revenue gain of 4 percent in constant currency. Asia Pacific revenue jumped 14 percent to $5.1 billion (4 percent in constant currency).
  • IBM ended the quarter with a services backlog--outsourcing, BPO deals and the like--of $118 billion, up $2 billion from a year ago.
  • By unit, global services technology services revenue was $9.67 billion, up 17.2 percent from a year ago, with global business services up 17.4 percent to $4.9 billion. Systems and technology revenue was $4.22 billion, down 6.7 percent. And software revenue was up 14 percent to $4.85 billion.
  • On the hardware front, IBM's System z server product revenue was up 10 percent from a year ago. System p UNIX server revenue was up 2 percent and System i servers fell 21 percent. Storage revenue was up 10 percent.

  • Revenue from IBM's middleware business--WebSphere, Tivoli, Lotus and Rational primarily--was $3.8 billion, up 16 percent from a year ago. Information management software--think Cognos--had revenue growth of 27 percent.
  • Profit margins were 41.5 percent, up from 40.2 percent a year ago.


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