Quotes From IBM's Call About its Software Business (IBM)

Jan.18.06 | About: International Business (IBM)

Quotes from IBM's Q4 earnings conference call, January 17th 2006 (entire call transcript here):

Software revenue was $4.6 billion in the quarter, flat year over year as reported but up 3% at constant currency. For the full year software grew 4% both as reported and at constant currency. Key branded middleware grew 3% as reported, and 7% at constant currency in the fourth quarter. This concluded a solid year with key branded middleware growing 9% year-to-year as reported and at constant currency. Driven by double digit growth in WebShphere, Tivoli and Lotus. Operating expenses were down 6% as reported. And down 3% at constant currency. For the full year operating expenses were down 2% as reported and down 3% at constant currency. The software market remains highly competitive. And our fourth quarter results for mix by geography: We saw double digit growth in the Americas where we believe we gained market share in both the fourth quarter and full year. This is partially offset by weaker results in Europe. The WebSphere family of software grew 4% as reported and 7% at constant currency. For the full year, WebSphere grew 10% both as reported and at constant currency. The WebSphere family of software provides the foundation technologies for customers implementing business processes and application and its services oriented architecture. As the customers interest in SOA has increased so has the demand for highly scalable robust infrastructure platforms, such as WebSphere.

In 2005 we saw particular strength in WebSphere application service and portal which grew 15% and 12% respectively. The WebSphere application service did particularly well in the fourth quarter growing 16%. In October we completed the acquisition of data power technology, which combines hardware and software technology in an appliance that helps simplify accelerate and increase the security of SOA deployments. Information management software grew 4% year-to-year as reported and 8% at constant currency. For the year information management grew 8%. In 2005 we saw growth in our information management distributed software, fuel by our content management and information integration product steps.

Ascential continues to exceed our expectation. Lotus revenue grew 2% year-to-year as reported and 7% at constant currency for the fourth quarter, completing a good year of 10% growth. Lotus continues to enjoy strong customer response for the Domino version 7.0 product line, as well as very high interest in workplace software. Workplace more than doubled both year-over-year and sequentially. Rational Software declined 2% as reported and grew 2% at constant currency in the fourth quarter. For the full year, Rational grew 4%. In the fourth quarter the Rational products that had good performance in both Asia and Europe, in the America a small number of customers delayed their buying decisions.

Tivoli grew 3% as reported and 7% at constant currency in the quarter. Full year growth was at 11%. Tivoli storage software products grew 17% of the quarter and 24% for the year as customer adoption of our virtualization technologies continue to gain traction. And the fourth quarter we announced our intention to acquire Micromuse. This software helps the customers manage the complex IT networks that support data, voice and video traffic. Micromuse is well positioned to participate in the growing demand for a variety of voice, audio and video services delivered over the Internet.

Overall our software businesses were solid in 2005. We believe we gain share in all 5 key middleware brands in the 2005 and held share in total middleware. The profitability of our software portfolio, improved as well, with pre-tax income margin growing by 3 points in 2005.