IBM posts strong results
IBM has reported fourth quarter fiscal 2008 earnings of $3,28 per share, a 17% increase year-over-year, but says that total revenue for the quarter dropped by 6% to $27 billion.
Analysts polled by Thomson Reuters had on average predicted earnings of $3,03 per share and $28,15 billion in revenue.
Net income for the fourth quarter was $4,4 billion, a 12% increase over 2007.
For the full year, IBM posted company records for revenue, with $103, 6 billion; pre-tax profit, with $16,7 billion; and earnings per share at $8,93.
The company expects earnings per share of at least $9,20 in 2009.
Chief Financial Officer Mark Loughridge expects the first half of next year to be more difficult than the second, but revenue growth will be relatively flat in the first quarter but then expand, he adds.
IBM says that the strong dollar contributed to its drop in fourth-quarter 2008 revenue. When adjusted for currency fluctuations, revenue would have fallen by 1%, the company said.
Software revenue grew by 3%, but Global Technology Services and Global Business Services fell by 4% and 5%, respectively, an indication that customers are pulling back somewhat on IT projects.
However, IBM also reported service engagements worth $17,2 billion, including some 24 deals with a price tag higher than $100 million.
IBM’s Systems and Technology division took a significant hit, dropping by 20% to $5,4 billion, a sign that customers are holding off on hardware purchases. System z mainframe sales fell by 6%, while System p product revenue grew by 8%
year-over-year. System Storage revenue dropped by 20% and revenue from Retail Store Solutions shrank by 28%.
Fourth quarter revenue was weakest in Europe, the Middle East and Africa, where it fell by 12%. Revenue from the Americas fell by 2% and Asia-Pacific dropped by 1%.
IBM said it achieved its results by focusing on improving profit margins and investing in growth markets, although it also benefited from a lower tax rate.
Its tax rate was 23,8% for the quarter, compared to 28% in the same period last year.
The company’s press release included no announcement about major layoffs, which have been the subject of rampant rumours in recent weeks.
"Right now we’re in wait and see mode," says Lee Conrad, national coordinator of the Alliance at IBM/CWA Local 1701, a union that is trying to organise workers at IBM. "We do know people have been told to look for other jobs."
The union is calling on IBM to take certain measures to avoid layoffs, such as suspending its stock buyback programme, eliminating executive positions and cutting executive pay.
It also wants IBM to be transparent about where any job cuts are taking place and whether they are being moved offshore.
If it does cut jobs, IBM would be only the latest of its peers in the tech industry to do so as the worldwide economic crisis continues.
Forrester Research recently predicted that global IT spending would drop slightly overall this year, but then rebound in 2010.
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