IBM adjusts 2012 expectations up with Q2 results

July 19, 2012 – BUSINESS WIRE — IBM (NYSE: IBM) announced second-quarter 2012 total revenues of $25.8 billion, net income of $3.9 billion, total gross profit margin of 47.6%, and diluted earnings of $3.34 per share (compared with diluted earnings of $3.00 per share in the second quarter of 2011, an increase of 11%). IBM is raising its full-year operating earnings per share expectations to “at least $15.10,” said Ginni Rometty, IBM president and CEO, citing H1 performance and IBM’s ability to deliver “greater value to a wider range of clients” for the $0.10 increase.

“In the second quarter, we delivered strong profit, earnings per share and free cash flow growth. This performance reflects continued strength in our growth initiatives and investments in higher value opportunities,” said Rometty. “These are fundamental elements of our long-term business model.”

OEM revenues declined year-over-year (Y/Y), while revenues for Brazil, Russia, India, China (BRIC) grew. Revenues from the Systems and Technology segment (hardware) at IBM fell Y/Y.

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Details on IBM’s Q2 results:

Diluted EPS:

-GAAP: $3.34, up 11 percent;

-Operating (non-GAAP): $3.51, up 14 percent;

Net income:

-GAAP: $3.9 billion, up 6 percent;

-Operating (non-GAAP): $4.1 billion, up 8 percent;

Gross profit margin:

-GAAP: 47.6 percent, up 1.2 points;

-Operating (non-GAAP): 48.2 percent, up 1.5 points;

Revenue: $25.8 billion, down 3 percent, up 1 percent adjusting for currency;

Free cash flow of $3.7 billion, up 9 percent;

Software revenue, flat, up 4 percent adjusting for currency;

Services revenue down 3 percent, up 1 percent adjusting for currency:

Services pre-tax income up 18 percent;

Services backlog of $136 billion, down 6 percent, flat adjusting for currency;

Systems and Technology revenue down 9 percent, down 7 percent adjusting for currency;

Growth markets revenue up 2 percent, up 8 percent adjusting for currency;

Business analytics revenue up 13 percent in the first half;

Smarter Planet revenue up more than 20 percent in the first half;

Cloud revenue doubled first-half 2011 revenue;

Full-year 2012 operating (non-GAAP) EPS expectations raised to at least $15.10 from at least $15.00.

 

Geographic Regions: The Americas’ second-quarter revenues were $11.1 billion, a decrease of 1 percent (up 1 percent, adjusting for currency) from the 2011 period. Revenues from Europe/Middle East/Africa were $7.9 billion, down 9 percent (flat, adjusting for currency). Asia-Pacific revenues increased 2 percent (up 4 percent, adjusting for currency) to $6.3 billion. OEM revenues were $512 million, down 24 percent compared with the 2011 second quarter.

 

Growth Markets: Revenues from the company’s growth markets increased 2 percent (up 8 percent, adjusting for currency) and more than 30 countries had double-digit revenue growth, adjusting for currency. Revenues in the BRIC countries — Brazil, Russia, India and China — increased 5 percent (up 12 percent, adjusting for currency).

 

Services: Global Technology Services segment revenues decreased 2 percent (up 2 percent, adjusting for currency) to $10.0 billion. Global Business Services segment revenues were down 4 percent (down 1 percent, adjusting for currency) to $4.7 billion.

Pre-tax income from Global Technology Services increased 24 percent and pre-tax margin increased to 17.1 percent. Global Business Services pre-tax income increased 7 percent and pre-tax margin increased to 16.6 percent.

The estimated services backlog at June 30 was $136 billion, down 6 percent year over year at actual rates (flat, adjusting for currency).

 

Software: Revenues from the Software segment were $6.2 billion, flat (up 4 percent, adjusting for currency) compared with the second quarter of 2011. Software pre-tax income increased 8 percent and pre-tax margin increased to 35.9 percent.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $3.9 billion, flat (up 4 percent, adjusting for currency) versus the second quarter of 2011. Operating systems revenues of $628 million were flat (up 3 percent, adjusting for currency) compared with the prior-year quarter.

Revenues from the WebSphere family of software products increased 3 percent year over year. Information Management software revenues decreased 1 percent. Revenues from Tivoli software increased 2 percent. Revenues from Lotus software decreased 8 percent, and Rational software decreased 7 percent.

 

Hardware: Revenues from the Systems and Technology segment totaled $4.3 billion for the quarter, down 9 percent (down 7 percent, adjusting for currency) from the second quarter of 2011. Systems and Technology pre-tax income decreased $159 million.

Total systems revenues decreased 7 percent (down 5 percent, adjusting for currency). Revenues from Power Systems were down 7 percent compared with the 2011 period. Revenues from System x were down 8 percent. Revenues from System z mainframe server products decreased 11 percent compared with the year-ago period. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 8 percent. Revenues from System Storage decreased 4 percent, and revenues from Retail Store Solutions decreased 4 percent year over year. Revenues from Microelectronics OEM decreased 22 percent.

 

Financing: Global Financing segment revenues were flat (up 4 percent, adjusting for currency) in the second quarter at $517 million. Pre-tax income for the segment increased 6 percent to $528 million.

 

Net income for the six months ended June 30, 2012 was $6.9 billion compared with $6.5 billion in the year-ago period, an increase of 6%. Diluted earnings per share were $5.95 compared with $5.30 per diluted share for the 2011 period, an increase of 12%. Revenues for the six-month period totaled $50.5 billion, a decrease of 2% (up 1%, adjusting for currency) compared with $51.3 billion for the six months of 2011.

 

Operating (non-GAAP) net income for the six months ended June 30, 2012 was $7.3 billion compared with $6.8 billion in the year-ago period, an increase of 9 percent. Operating (non-GAAP) diluted earnings per share were $6.29 compared with $5.50 per diluted share for the 2011 period, an increase of 14 percent.

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