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IBM services, hardware revenue falls in Q2 while profit grows

Joab Jackson | July 19, 2012
For its most recent financial quarter, IBM experienced a drop-off in revenue, though it was able to maintain profit growth.

For its most recent financial quarter, IBM experienced a drop-off in revenue, though it was able to maintain profit growth.

For the second quarter, IBM generated US$25.8 billion in revenue, down 3 percent from the second quarter of 2011. The revenue fell short of estimates by analysts, who, according to Thompson Reuters, expected to see $26.28 billion, or only a 1.5 percent decrease.

Despite the dip in revenue, the company was better able to remain buoyant by other financial measures. Net income was $3.9 billion, up from $3.7 billion in the second quarter of 2011. Earnings rose to $3.34 per share, an 11 percent increase from $3.00 per share in the second quarter of 2011. As a result, the company has raised its EPS estimate for the full year to at least $15.10, from a previously estimated $15.

"IBM's business model enabled our strong profit performance in the current environment," said IBM Chief Financial Officer Mark Loughridge in a conference call with financial analysts. He attributed the results to a number of factors. This quarter's results are being compared to an exceptionally strong performance in the second quarter of 2011, he said. "We had a challenging compare," he said. In addition, global currency fluctuations cost IBM about $1 billion in revenue, he added.

Revenue by geographical region varied greatly. Revenue in the Americas was $11.1 billion, down 1 percent from a year earlier. Revenue from Europe, the Middle East and Africa was $7.9 billion, down 9 percent from a year earlier. The Asia-Pacific region proved to be a bright spot, producing $6.3 billion in revenue, up by 2 percent from a year earlier.

The service arms of IBM experienced a slump in revenue, down by 3 percent from a year earlier. Global Technology Services logged $10 billion, a decrease of 2 percent. And Global Business Services posted $4.7 billion in revenue, a dip of 4 percent from a year earlier.

IBM software sales, on the whole, were flat. Software revenue totalled $6.2 billion. Both middleware and operating systems showed no growth in revenue, though Websphere revenue grew by 3 percent from the same time a year earlier. On the other hand, Lotus software revenue decreased 8 percent, and Rational software decreased 7 percent, both year over year.

Hardware sales didn't do so well either. Revenue from the Systems and Technology division totaled $4.3 billion for the quarter, down 9 percent year over year. Total revenue from systems sales and service were down 7 percent from a year earlier. Power Systems revenue was down 7 percent. System x revenue was down 8 percent from a year earlier. System z mainframe server revenue decreased by 11 percent.

 

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