Is IBM a global software and services sector ETF?
Did you see the IBM numbers (conference call transcript here)? It is amazing how global IBM has become and how it is oriented to emerging markets. IBM now makes two-thirds of its revenue abroad. The NYT reports that its revenue in new growth markets like China and India, but also smaller ones like Vietnam, the Czech Republic and the Philippines, surged 20 percent in the first quarter.
IBM has moved sharply away from being a technology hardware company and focuses on services and software — making it less cyclical than many technology companies. The company reported Monday that first-quarter net income rose 13 percent, to $2.6 billion, or $1.97 a share, on $22.86 billion in revenue.
IBM is not alone in its growing dependence on international and emerging markets. Google (NASDAQ:GOOG) reported last week that its surging overseas business now accounted for 53 percent of revenue. In addition, while 65 percent of Intel’s (NASDAQ:INTC) manufacturing is still in America, 82 percent of its sales are overseas.
Technology companies held up better in the recession because they produce the tools that make it easier to operate globally such as high-speed networking and innovative software. And the explosion of internet networks enable skilled workers all over the world to become IBMers. Software, after all is based on intellectual capital and is easy to distribute worldwide.
IBM is a complicated machine and has set up global centers of expertise with responsibility across the company. For example, the global purchasing and procurement unit is in China; human relations tasks like expense report processing are done in the Philippines; and back-office financial processing is done in Brazil.
Finally, take a look at IBM employment trends. IBM still employs 105,000 workers in America, of a global payroll of more than 399,000 at the end of 2009, up 21 percent from five years ago. But its American work force is down 10,000 people from the end of 2008.
No question, IBM stock performance is much more dependent on global and emerging markets than on the state of the US economy.