Big Blue Delivers Big Profits

International Business Machines (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. (Click images to enlarge.)

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.

Comments

[User 144695]

IBM is considering buying a software co. Is it PATNI (PTI)?

[CrossProfit]

It is important to note that despite the U.S. slowdown in Q1, IBM managed 8% growth. Also, overseas growth is far greater than just a currency advantage.

We reiterate our analysis from October 2007 that we are heading to the 128/129 range, as posted here;
www.crossprofit.com/view_symbol.asp?id=25892

User 144695,

IBM constantly looks for new acquisitions as this has been their growth model for the past several years. We have no information regarding PTI.

See articles on above link regarding Cognos acquisition, where it was a likelihood that IBM was in the running. It is usually far more difficult to gauge what IBM is looking at. Most of the rumors are pure speculation and are usually incorrect.

CrossProfit

[goatfarmer]

IBM has one of the best long term technical patterns of US stocks.

[atauber]

does this tell us that whatever the U.S. will lose because of the credit fiasco it will be madu up by exports?

[CrossProfit]

atauber,

No. A portion will be offset by higher exports, in part due to currency valuations. However, the trade deficit is real and is in a large part directly related to energy issues.

CrossProfit