April 16th, 2008
Big Blue delivers big profits; Ups 2008 outlook
IBM on Wednesday handily topped Wall Street estimates with net income of $2.3 billion, or $1.65 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.
Larry Dignan is Editor in Chief of ZDNet and Smart Planet as well as Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
Follow Larry on Twitter.
Subscribe to Between the Lines via Email alerts or RSS.
