IBM posts impressive Q1 results

IBM posted its 1Q08 financial results yesterday, and it seems that they have taken the analysts by surprise.  Certainly, the BBC report I’ve just seen suggested that they were “unexpectedly strong” considering the state of the economy, picked out the fact that they were built on gains in non-US markets, and compared them very favourably against Microsoft and other IT vendors.

Highlights from the results (emphasis mine):

IBM Reports 2008 First-Quarter Results
ARMONK, NY – 16 Apr 2008:

Diluted earnings of $1.65 per share, up 36 percent;
Total revenues of $24.5 billion, up 11 percent;

Global Technology Services revenues up 17 percent; pre-tax income up 45 percent;
Global Business Services revenues up 17 percent; pre-tax income up 23 percent;
Software revenues up 14 percent; pre-tax income up 22 percent;
65 percent of revenues from outside the U.S.; EMEA revenues up 16 percent; Asia Pacific up 14 percent; U.S. up 6 percent;

Services signings of $10.8 billion at constant currency; $12.6 billion at actual rates.

IBM (NYSE: IBM) today announced first-quarter 2008 diluted earnings of $1.65 per share from continuing operations compared with diluted earnings of $1.21 per share in the first quarter of 2007, an increase of 36 percent as reported. First- quarter income from continuing operations was $2.3 billion compared with $1.8 billion in the first quarter of 2007, an increase of 26 percent. Total revenues for the first quarter of 2008 of $24.5 billion increased 11 percent (4 percent, adjusting for currency) from the first quarter of 2007.

“IBM had a very good quarter, and a good start to 2008. These results reinforce our confidence in IBM’s ability to perform well in a dynamic global economy. Our performance is a tribute to the way we have repositioned our company over the past several years, as well as the hard work of IBMers across the globe,” said Samuel J. Palmisano, IBM chairman, president and chief executive officer.

“IBM is a different company today, with a number of unique advantages: our global reach and scale, our strength in profitable growth segments, strong recurring revenue and profit streams, products and services that create real value for clients, and the discipline and financial strength and flexibility that enables us to adjust our business model as conditions require.

“We feel good about the rest of the year.”

A few other points do stand out from the rest of the report.

1) Currency fluctuations account for a significant part of of those impressive sounding year-on-year rises, so this needed to be taken into account,
2) The shift away from traditional hardware-based revenues towards software and services continues apace,
3) System i (iSeries/AS400) continues its sad downward spiral ;-( ,
4) Lotus/WPLC continues its almost continuous record of double-digit growth over the past 3 years or so, with 17% gains.  In a very mature market, that is impressive…

From a geographic perspective, the Americas’ first-quarter revenues were $9.9 billion, an increase of 8 percent as reported (6 percent, adjusting for currency) from the 2007 period. Revenues from Europe/Middle East/Africa were $8.8 billion, up 16 percent (4 percent, adjusting for currency). Asia-Pacific revenues increased 14 percent (3 percent, adjusting for currency) to $5.1 billion. OEM revenues were $696 million, down 16 percent compared with the 2007 first quarter. Revenues from the countries in IBM’s growth markets unit were up 11 percent at constant currency and represent about 17 percent of the company’s total revenue.

Total Global Services revenues grew 17 percent (9 percent, adjusting for currency) with strong double-digit growth in all lines of businesses. […]

Revenues from the Systems and Technology segment totaled $4.2 billion for the quarter, down 7 percent
(12 percent, adjusting for currency). Revenues decreased 2 percent excluding the year-to-year impact of the Printing System Division divestiture in June 2007. Systems and Technology revenues from System z server products increased 10 percent versus the year-ago period, which reflects the successful introduction of the new z10 enterprise class server. Total delivery of System z computing power, which is measured in MIPS (millions of instructions per second), increased 14 percent. Revenues from the System p UNIX server products increased 2 percent compared with the 2007 period and revenues from the System x servers were flat year over year. Revenues from the System i servers decreased 21 percent. Revenues from System Storage increased 10 percent and revenues from Technology decreased 20 percent.

Revenues from the Software segment were $4.8 billion, an increase of 14 percent
(6 percent, adjusting for currency) compared with the first quarter of 2007. Revenues from IBM’s middleware products, which primarily include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $3.8 billion, up 16 percent versus the first quarter of 2007. Operating systems revenues of $529 million increased 1 percent compared with the prior-year quarter.

For the WebSphere family of software products, which facilitate customers’ ability to manage a wide variety of business processes using open standards to interconnect applications, data and operating systems, revenues increased 20 percent. Revenues for Information Management software, which enables clients to leverage information on demand, increased 27 percent and includes growth from the acquisition of Cognos, which closed in the quarter. Revenues from Tivoli software, infrastructure software that enables clients to centrally manage networks including security and storage capability, increased 9 percent, and revenues for Lotus software, which allows collaborating and messaging by clients in real-time communication and knowledge management, increased 17 percent year over year
. Revenues from Rational software, integrated tools to improve the processes of software development, increased 3 percent compared with the year-ago quarter.

Well done to all the IBMers reading…

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