IBM Reports 2010 Third-Quarter Results

ARMONK, N.Y. — (BUSINESS WIRE) — October 18, 2010 — IBM (NYSE: IBM)

  • Diluted earnings per share of $2.82, up 18 percent;
  • 31 consecutive quarters of EPS growth, 13 of last 15 at double digits;
  • Full-year 2010 EPS expectations raised to at least $11.40;
  • Net income of $3.6 billion, up 12 percent;
  • Net margin of 14.8 percent, up 1.1 points;
  • Revenue of $24.3 billion, up 3 percent as reported, 4 percent adjusting for currency;
  • Growth markets revenue up 16 percent, 13 percent adjusting for currency;
  • BRIC countries revenue up 29 percent, 26 percent adjusting for currency;
  • Business analytics revenue up 14 percent;
  • Systems and Technology revenue up 10 percent, 11 percent adjusting for currency;
  • System z mainframe revenue up 15 percent; MIPS up 54 percent;
  • Software revenue excluding divested PLM operations, up 4 percent, 6 percent adjusting for currency; up 1 percent including divested PLM operations;
  • Services revenue up 2 percent, as reported and adjusting for currency;
  • Services backlog of $134 billion, up $5 billion quarter to quarter, down $2 billion adjusting for currency, and flat year over year.

IBM (NYSE: IBM) today announced third-quarter 2010 diluted earnings of $2.82 per share, compared with diluted earnings of $2.40 per share in the third quarter of 2009, an increase of 18 percent.

Third-quarter net income was $3.6 billion compared with $3.2 billion in the third quarter of 2009, an increase of 12 percent. Total revenues for the third quarter of 2010 of $24.3 billion increased 3 percent (4 percent, adjusting for currency) from the third quarter of 2009.

"In the third quarter we grew revenue in our hardware, software and services businesses, expanded margins and again increased earnings per share at double digits," said Samuel J. Palmisano, IBM chairman, president and chief executive officer. "We achieved excellent performance in our growth markets unit, reflecting sustained investments through the downturn and the continued strength of the infrastructure build-out in these countries.

"Looking ahead, we are uniquely positioned in the enterprise, investing in high value segments like business analytics, advanced systems and smarter planet solutions. As a result, we are confident we can deliver strong business performance to grow profit, return value to our shareholders and to achieve full-year 2010 diluted earnings per share of at least $11.40."

From a geographic perspective, the Americas’ third-quarter revenues were $10.2 billion, an increase of 3 percent (2 percent, adjusting for currency) from the 2009 period. Revenues from Europe/Middle East/Africa were $7.4 billion, down 6 percent (up 1 percent, adjusting for currency). Asia-Pacific revenues increased 14 percent (7 percent, adjusting for currency) to $5.9 billion. OEM revenues were $806 million, up 27 percent compared with the 2009 third quarter.

Growth Markets

Revenues from the company’s growth markets organization increased 16 percent (13 percent, adjusting for currency) and represented 21 percent of IBM’s total geographic revenue in the quarter. Revenues in the BRIC countries – Brazil, Russia, India and China – increased 29 percent (26 percent, adjusting for currency), and 28 other growth market countries also had double-digit revenue growth, adjusting for currency. Growth markets revenues for both servers and storage increased by more than 20 percent in the quarter. IBM now has 103 sales offices in the growth markets countries after opening 40 offices in 2010.

Services

Total Global Services revenues increased 2 percent (2 percent, adjusting for currency). Global Technology Services segment revenues increased 1 percent (1 percent, adjusting for currency) to $9.5 billion. Global Business Services segment revenues were up 5 percent (5 percent, adjusting for currency) at $4.6 billion.

Global Services pre-tax income increased to $2.2 billion, up 4 percent year over year. Pre-tax income from Global Technology Services increased 4 percent and Global Business Services increased 5 percent. Segment pre-tax margins increased to 15.5 percent and 14.6 percent, respectively.

The estimated services backlog at September 30 was $134 billion, up $5 billion quarter to quarter (down $2 billion, adjusting for currency), and flat year over year at actual rates and adjusting for currency. The backlog includes signed services contracts of $11.0 billion (down 7 percent) in the quarter, of which 10 contracts were greater than $100 million. Transactional signings were $5.4 billion, an increase of 4 percent (4 percent, adjusting for currency). Outsourcing signings were $5.7 billion, down 15 percent (14 percent, adjusting for currency). Including an agreement signed on October 8, the company would have reported outsourcing signings growth of 14 percent, adjusting for currency. This would have increased total signings reported from $11.0 billion to $12.7 billion.

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