Jul. 17, 2014, 5:00 PM
- With the help of easier comps, IBM's hardware/chip sales fell 11% Y/Y in Q2, a notable improvement from Q1's 23% and Q4's 26%. Mainframe sales -1%, Power servers (UNIX-focused) -28%, x86 servers (due to be sold to Lenovo) -3%, storage -12%, chips (reportedly on the block) -18%.
- Global Technology Services -1% vs. -3% in Q1. Global Business Services -2% vs. flat Q1 growth. The services backlog stood at $136B, -1% Y/Y after backing out the sale of IBM's customer care outsourcing ops to Synnex.
- Software revenue +1% vs. +2%. OS sales (hurt by server weakness) fell 13%, while key branded middleware rose 1%. Global financing +4% vs. +3%.
- Big Blue spent $3.7B on buybacks, less than the whopping $8.2B spent in Q1. Gross margin rose 40 bps Y/Y to 49.1%. Q2 free cash flow was $3B, less than net income of $4.3B (continuing a recent trend).
- Americas revenue -1%, EMEA +1%, Asia-Pac (weak in recent quarters) -9%. "Growth markets" -7%, and BRIC countries -2%.
- Tax rate was 20%, even with Q1 but down from 22% a year ago. IBM ended Q2 with $9.7B in cash, and $17.1B in non-Global Financing debt.
- IBM now -1.1% AH. Q2 results, PR.
Jul. 17, 2014, 4:10 PM| 15 Comments
Jul. 16, 2014, 5:35 PM
Apr. 16, 2014, 4:31 PM
- IBM is reiterating full-year guidance for EPS of at least $18 (consensus is at $17.84).
- Big Blue spent an eye-popping $8.2B on buybacks in Q1, up from $5.8B in Q4. That allowed EPS to nearly meet estimates in spite of a $450M revenue miss. On the other hand, IBM's tax rate (the subject of recent scrutiny) rose to 20% from Q4's 11% and Q3's 16%. A 90 bps Y/Y increase in gross margin to 47.6% also boosted EPS.
- Hardware/chip sales remain bleak: They fell 23% Y/Y vs. 26% in Q4. Software +2% vs. +3%, global technology services -3% vs. -4%, global business services flat vs. +1%, global financing +3% vs. flat. The services backlog stood at $138B at quarter's end, down $5B Q/Q and $3B Y/Y.
- Asia-Pac remains a weak spot: Sales fell 12% Y/Y. Americas were down 4%, and EMEA up 4%. "Growth markets" and BRIC sales each fell 11%.
- Q1 free cash flow was just $0.6B, well below net income of $2.6B. Cash on hand fell to $9.7B from $11.1B at the end of Q4, and non-global financing debt rose to $15.7B from $12.2B.
- Q1 results, PR
Apr. 16, 2014, 4:12 PM| 19 Comments
Apr. 16, 2014, 12:10 AM
Apr. 15, 2014, 5:35 PM
Jan. 21, 2014, 6:27 PM
- IBM, which has already carried out a string of job cuts in recent quarters, expects to record a fresh $1B workforce rebalancing charge in Q1.
- The news follows a quarter in which a 5.5% Y/Y revenue drop led IBM's SG&A spend to rise to 21.6% of revenue from 20.2% a year earlier, and its R&D spend to rise to 5.7% of revenue from 5.4%.
- In addition to its huge buybacks, much attention is being given to the role an 11% tax rate (down from 16% in Q3) played in boosting IBM's earnings. Fund manager Mike Bergen estimates EPS would've been $0.80 lower if Big Blue's tax rate was at the 23% level expected by analysts.
- Software (+3% Y/Y) was a relative bright spot, thanks to healthy middleware (+15%) and database (+5%) sales. "Cloud revenue," a catch-all phrase covering a variety of hardware, software, and services sales, rose 69% Y/Y to $4.4B, boosted by the SoftLayer acquisition.
- 2013 free cash flow was $15B, less than net income of $18B. IBM ended Q4 with $11.1B in cash, and $12.2B in non-global financing debt. CEO Ginni Rometty insists IBM is on track to hit its 2015 EPS goal of "at least" $20.
- IBM -2.9% AH. More on IBM's Q4.
Jan. 21, 2014, 4:24 PM
- IBM has established 2014 EPS guidance of $18, slightly above a $17.97 consensus.
- Revenue continues to be pressured by nosediving hardware/chip sales, which declined 26% Y/Y in Q4 after dropping 17% in Q3 and 12% in Q2. Mainframes -37%, Power servers (UNIX-driven) -31%, x86 servers (reportedly on the block again) -16%, storage -13%, chips -33%. The numbers suggest share loss to H-P, Dell, TSMC, and others.
- Global Technology Services revenue -4%, same as Q3 and Q2. Global Business Services +1%. Services backlog is at $143B, +1% Q/Q and +2% Y/Y. Software +3% vs. +1%, global financing flat vs. +6%.
- $5.8B was spent on buybacks, up from $1.9B in Q3 and providing a big lift to EPS. Gross margin, which has been steadily rising in recent years, rose 30 bps Y/Y to 52.6%.
- Asia-Pac sales, pressured by NSA fallout, were soft again, declining 12% Y/Y; they dropped 15% in Q3. Americas fell 3%, and EMEA was up 1%. Sales to "growth markets" declined 5% after falling 9% in Q3.
- IBM -2.2% AH. CC at 4:30PM ET.
- Q4 results, PR
Jan. 21, 2014, 4:07 PM
Jan. 21, 2014, 12:10 AM
Jan. 20, 2014, 5:35 PM
Oct. 17, 2013, 2:08 PM
- UBS' Steve Milunovich, who downgraded IBM (IBM -6.8%) to Hold following its $1.07B Q3 revenue miss: "Results could improve as 2014 unfolds, but the next two quarters likely won’t be too encouraging ... Normally we would wait out mediocre results ... but there are too many questions this time." He observes IBM was only able to maintain full-year EPS guidance because of the $0.40/share Q3 boost provided by a lower tax rate.
- SocGen (Hold) thinks IBM might once more turn to M&A to lift growth. In particular, the firm considers major app software purchases a possibility as database and middleware sales are pressured by the cloud transition. IBM's middleware sales rose 1% Y/Y in Q3, and "information management" sales (inc. databases) rose 2%. OS sales, hurt by server weakness, fell 4%.
- CLSA is staying bullish, praising IBM's efforts to deal with industry pressures by making large analytics/cloud investments. Wells Fargo (Market Perform) expects a new buyback to be announced on Oct. 29, but also thinks "visibility to the 2015 $20 EPS target has become murkier."
- More on IBM's Q3: I, II. CC transcript.
Oct. 16, 2013, 6:13 PM
- IBM's Chinese sales fell 22% Y/Y in Q3 and its hardware sales within the country dove 40%, management disclosed on the CC. The latter accounted for 5% of the 9% revenue drop seen for "growth markets" during Q3. A demand rebound isn't expected until after Q1 2014, as local firms wait for economic reform plans to be announced.
- Talking about growth market weakness in general, IBM admits only half of its challenges stem from business conditions; the rest are execution-related.
- "We see a pattern...," said Bernstein's Toni Sacconaghi in a pointed question. With IBM having seen six straight quarters of revenue declines, Sacconaghi wonders if Big Blue should model for 0% rev. growth going forward. Management gave a list of reasons why a return to growth was possible, including a healthy services backlog (+6% Y/Y in Q3 exc. forex).
- Power systems (UNIX server) sales plunged 38% Y/Y in Q3, worse than Q2's 25%. System x (x86 servers) fell 18%, storage hardware 11%. System z (mainframes) rose 6%, aided by an upgrade cycle. Chips +1%.
- One bright spot: cloud-related revenue topped $1B, with $460M coming from cloud services (a chunk of which likely comes from SoftLayer).
- Q3 free cash flow (exc. financing receivables) was $2.2B, down $900M Y/Y and well below net income of $4.4B. IBM ended the quarter with $12.3B in cash/investments and $10.3B in non-global financing debt.
- IBM now -5.9% AH. Q3 results, guidance/details.
Oct. 16, 2013, 4:20 PM
- IBM is still guiding for 2013 EPS of at least $16.90 (consensus is at $16.89). Job cuts, $1.9B in buybacks (down from $3.6B in Q2), a lower tax rate (16% vs. 22% in Q2 and 24.6% a year earlier), and a 60 bps Y/Y increase in gross margin to 48% allowed Q3 EPS to beat estimates in spite of a $1B revenue miss.
- Asia-Pac revenue -15% Y/Y, Americas -1%, EMEA +1%. Sales to BRIC countries fell 15% Y/Y., and sales to growth markets in general fell 9%.The numbers come shortly after Teradata warned of weak Asian sales.
- Services revenue -4% Y/Y, same as Q2. Hardware is still ugly, -17% vs. -12%. Software +1% vs. +4%. Services backlog was $141B at quarter's end, flat Q/Q and +2% Y/Y.
- IBM -5.2% AH. CC at 4:30PM ET.
- Q3 results, PR
Oct. 16, 2013, 4:06 PM
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