Move to higher-value businesses improved earnings and margin
IBM has reported revenue of $23.6 billion in the third quarter of 2009, down 7%, or 5% after the currency adjustments, compared to $25.3 billion in the same period last year.
The company posted a total gross profit margin of 45.1%, up 1.8 points compared to 43.3% in the third quarter of previous year, led by improving margins in services and software. Overall gross profit margins improved year-to-year for the 20th time in the last 21 quarters and total services gross profit margins improved year-to-year for the 18th time in the last 19 quarters.
For the quarter ended September 30, net income increased 14% to $3.2 billion, compared to $2.8 billion in the same period a year ago. The diluted earnings increased 18% to $2.40 per share from $2.04 per share.
Samuel Palmisano, chairman, president and chief executive officer of IBM, said: “Our long-term strategic shift to higher-value businesses again enabled us to deliver outstanding margin, earnings and cash flow growth in the third quarter. We also saw improved revenue trends in our business and share gains in software and hardware.”
Geographically, the America’s revenue which is the IBM’s biggest market dropped 5% to $9.9 billion and the revenue from the Europe/Middle East/Africa was down 12% to $7.8 billion. Asia-Pacific revenues remained flat with $5.2 billion.
Total global services revenue decreased 7% and pre-tax income increased 11%. Global technology services segment revenue was down 4% to $9.4 billion, while global business services segment revenue dropped 11% to $4.3 billion compared to same period a year ago.
The revenue from the software segment rose 3% to $5.1 billion and revenue from IBM’s key middleware products, which include WebSphere, information management, Tivoli, Lotus and rational products were $2.9 billion, an increase of 2% compared to same period last year. The systems and technology segment revenue decreased 12% to $3.9 billion.
Mr Palmisano added: “We continued to invest for growth in areas where clients see potential for value creation including Smarter Planet solutions, cloud computing and advanced business analytics. We are optimistic about 2009 as we again raise our full-year expectations and we remain well ahead of pace for our 2010 roadmap of $10 to $11 per share.”
IBM said it expects full-year 2009 earnings of at least $9.85 per share compared with its previous expectation of at least $9.70 per share. It expects full-year 2009 pre-tax income for its software and services segments to grow at a double-digit rate and reach around $8 billion.