IBM delivers solid second quarter, but strong U.S. dollar dings sales

IBM on Tuesday delivered strong second quarter earnings, but revenue took a hit due to a strong dollar. Software and services led the way.

IBM reported second quarter earnings of $3.4 billion, or $2.61 a share, on revenue of $23.7 billion. Wall Street was expecting earnings of $2.58 a share on revenue of $24.17 billion. IBM said a strong dollar was a $500 million hit to revenue. Most analysts didn't account for currency fluctuations. A strong dollar relative to international currencies dings sales when international revenue is tallied in the U.S.

Big Blue CEO Sam Palmisano said in a statement that the company expects 2010 earnings of at least $11.25 a share, in line with current expectations. IBM CFO Mark Loughridge said on a conference call that the company has raised its earnings targets both in January and April. The company's previous outlook called for 2010 earnings of $11.20 a share.

By the numbers:

• IBM's second quarter global technology services revenue was $9.23 billion, up from $9.1 billion a year ago. Global business services revenue was $4.48 billion, up 3.3 percent from a year ago. Loughridge said the services pipeline looks strong for the rest of the year and revenue and profit margins should accelerate into the second half.

• By verticals, financial services accounted for the most revenue ($6.7 billion) in the second quarter with the public sector accounting for $3.9 billion. Industrial, distribution and communications were in a virtual tie at about $2.3 billion to $2.4 billion in revenue each.

• Software revenue was $5.27 billion, up 2.1 percent from a year ago.

• IBM's system and technology revenue was $3.98 billion, up 3.4 percent from a year ago. Loughridge dinged Oracle's Sun unit and noted that IBM continues to win hardware deals and has been ripping out plenty of Sun servers. "Win rates over Sun are accelerating," he said.

• Revenue from Brazil, Russia, India and China was up 22 percent.

• Services backlog was $129 billion, up $1 billion.

And the overall product line scorecard:

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