SOA demand gives IBM services boost

IBM's second quarter results were strong amid growth in its services business.

Big Blue said Wednesday that earnings per share from continuing operations were $2.33 billion, or $1.55 a share, including a gain of 5 cents a share related to the sale of its printing services division. Backing that gain out IBM reported earnings of $1.50 a share, up from $1.30 a share in the same quarter a year ago.

According to Thomson Financial, IBM was expected to report earnings of $1.47 a share on revenue of $23 billion.

Revenue was $23.8 billion, a sum that beat Wall Street estimates of $23 billion. Revenue was up 9 percent from a year ago.

Some observations:

• By geography, IBM had Americas revenue of $10.1 billion, up 6 percent from a year ago. Europe/Middle East/Africa revenue was $8.2 billion, up 13 percent. Adjusted for the weak dollar sales were up 6 percent. Asia-Pacific revenue was up 10 percent to $4.6 billion.
• Services revenue grew 10 percent on gains in Asia Pacific. Global Services revenue was up 10 percent to $4.3 billion on "strong client demand for SOA offerings and global delivery capabilities." Technology services revenue was $8.8 billion. Signed contracts totaled $11.7 billion, up 22 percent from a year ago.
• Systems and technology revenue was roughly flat at $5.1 billion. Server sales were a mixed bag and storage revenue was up 6 percent.
• Software revenue was $4.8 billion, up 13 percent. Middleware sales ($3.8 billion) accounted for the bulk of that sum.
• Gross margins were healthy across IBM's businesses. Global business services margins improved to 24.3 percent from 23.4 percent a year ago.
• IBM's stock buybacks have had a nice impact. IBM bought back $14.6 billion of its shares in the second quarter. For the quarter ending June 30, IBM had 1.36 billion shares outstanding. The average for the second quarter was 1.46 billion shares outstanding, compared to 1.56 billion during the same quarter in 2006.