IBM » Topics » 2Q 2009 Highlights

This excerpt taken from the IBM 8-K filed Oct 16, 2009.

3Q 2009 Highlights

 

Thank you for joining us today.

 

We just finished another great quarter, driven by strong profit performance in software and services, and share gains in both hardware and software.

 

This quarter our revenue was up sequentially, and our growth rate improved vs. second quarter.  We expanded gross margin by almost 2 points and pre-tax margin by over 3 points year to year.  Our earnings per share is up 18 percent to $2.40.  In addition, we generated $3.4 billion of free cash flow, up almost $1.3 billion year to year, and ended the quarter with $11.5 billion of cash on hand, while reducing our debt by $4 billion since June.

 

We now expect to deliver at least $9.85 of earnings per share for the year, up 15 cents from our previous view of at least $9.70.

 

When you look at the third quarter as compared to the second quarter, though earnings per share growth is the same, both up 18 percent, we extended our share gains this quarter.

 

For instance, in software we gained almost 3 points of share in WebSphere, where we compete head-to-head with Oracle.  We also gained share in Information Management, Tivoli, and Rational.  These share gains drove 5 points of constant currency growth in branded middleware revenue.

 

In hardware, we gained 5 points of share in System p, and 2 points of share in System x.  That’s lot of share — and we’re taking it from both Sun and HP.  These share gains drove the improvement in our hardware revenue growth rate, which is 11 points better than last quarter.

 

Revenue growth from our services business was fairly consistent with second quarter, but the real story here was our ability to deliver double-digit profit growth by continually expanding margins.   This quarter our services pre-tax margin was almost 15 percent.  On a comparable basis our services margin is better than any of our key competitors.  And, believe me, we’re not done.

 

Overall, with an improving trend in revenue performance, we’ve continued to generate profit growth through margin expansion.

 

Over the last several years, we have been shifting to higher value areas, and significantly changing our mix of business.

 

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At the same time, our ongoing focus on driving productivity in all areas of the business is reducing our fixed cost base and improving the operational balance point.

 

We continue to expect about $3.5 billion of cost and expense savings this year from the structural actions we’ve taken.  And remember, we’ve got a spend base of almost $90 billion to work, so we’ve got a lot of opportunity to continue to reduce structure and make our business more efficient.

 

The impact of our transformation on this quarter’s profitability is clear and compelling.  Our combined services segment pre-tax margin was up 2.4 points year to year, and in software, we grew segment pre-tax profit by over 20 percent, and margin by over 6 points.  For the year, we continue to expect to generate about $8 billion of profit in software, and $8 billion in services.

 

We’re using this strong profit and cash generation to invest in capabilities that differentiate IBM and accelerate the development of new market opportunities, areas we’ve discussed in the past, like business analytics, and Smarter Planet, and cloud computing.

 

Now we’ve just closed a strong third quarter consistent with the momentum in our business throughout 2009, and we’re well-equipped going into the fourth quarter. Now, let’s get into the details of the third.

 

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This excerpt taken from the IBM 8-K filed Jul 17, 2009.

2Q 2009 Highlights

 

Thank you for joining us today.

 

This quarter we delivered $2.32 of earnings per share, up 18 percent year to year.  This is a record level of EPS for a first, second or third quarter, adjusting for stock splits.

 

We generated over $4 billion of cash from operations, and ended the quarter with $12.5 billion of cash on hand.  And we returned another $2.4 billion to shareholders, with $700 million in dividends and $1.7 billion of share repurchases.

 

With this powerful performance we now expect to generate at least $9.70 of earnings per share for the year, up 50 cents from our previous view of at least $9.20.

 

This is the result of the strategic transformation of our business.

 

Our ongoing shift to higher value areas has positioned us to better meet clients’ needs.  This quarter, our strategic outsourcing signings were up 38 percent at constant currency, and our key branded middleware revenue, now 58 percent of software, grew 5 percent at constant currency.

 

Our strategic acquisitions continue to contribute to our higher value capabilities.  This quarter Cognos, Telelogic, ILOG — and storage solutions XIV and Diligent — all showed very strong results.

 

But as you will see, margins are fueling our profit growth.  I’ll discuss how our transformation is driving this — but it is the shift to higher value, globally integrating our business, and our ongoing productivity initiatives that led to significant margin improvement.  We expanded our pre-tax margin by 4 points.  That’s our best margin improvement in almost four years, when we divested our PC business.

 

This quarter, our strategy and business model together delivered high levels of profit in a tough economic environment.

 

A key point here is that our model delivers improved margins, even when revenue growth is a headwind.  So when revenue growth becomes a tailwind, the operating leverage we’ve created will really come through — and continue to drive our earnings.

 

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We’re using this financial strength to invest in new areas that will help drive the next growth cycle for our clients, areas like Smarter Planet, business analytics and cloud computing.

 

I’ll come back to that later in the discussion.

 

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This excerpt taken from the IBM 8-K filed Apr 21, 2009.

1Q 2009 Highlights

 

Thank you for joining us today.

 

This quarter we delivered $1.70 of earnings per share, which was up 4 percent year to year.  This positions us well to achieve our objective of at least $9.20 of earnings per share for the year.

 

We generated $1 billion of free cash flow – up $450 million.

 

We ended the quarter with over $12 billion of cash on hand, and we reduced total debt by $3 billion.

 

We returned another $2½ billion to shareholders – with $700 million in dividends and $1.8 billion of share repurchases.

 

We’ve done a lot of work over the last decade to transform the company, shifting to higher value areas, globalizing our business, and constantly working to improve efficiency.  I’ll give you a few examples of how the changes we’ve made have positioned us to deliver this performance in a challenging economic environment.

 

First, with a focus on higher value offerings and strong services capabilities, we can adapt our offerings to deliver what clients are looking for.  Today, clients remained focused on trying to save cost and conserve capital.  Our services signings reflect our ability to meet these needs.

 

Total signings were up 10 percent at constant currency, with 27 percent constant currency growth in our longer-term categories.

 

Second, the actions we’ve taken have dramatically shifted the mix of our business – and our profit model has less dependence on hardware, which is more vulnerable to economic conditions.  In fact, this quarter effectively all of our pre-tax profit came from software, services and financing.  The annuity nature of these businesses provides a solid base of revenue, profit and cash.

 

Third, we have been investing to capture the opportunity in the growth markets.  Our constant currency revenue growth in these markets remained about 8 points higher than in the major markets.

 

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Finally, we’ve had an ongoing focus on driving productivity in all parts of the business, from sales efficiency to supply chain management to service delivery to global support functions.  The result of this work is to reduce our fixed cost base, and therefore improve the operational balance point.

 

Bottom line, we have built a more resilient business model, and one that generates more profit from each dollar of revenue.

 

IBM’s transformation positions us well for 2009, but more importantly, our model provides the cash we need to invest in new areas that will help drive the next growth cycle for our clients.  In addition to our growth markets investments, we have three other key initiatives.

 

First, is our Smarter Planet strategy, where governments, utilities and businesses are applying intelligence to the key processes of the world.  This allows clients to create more value and long term economic growth from their infrastructure investments.

 

The second new opportunity is Business Analytics, which leverages our broad capabilities to optimize our clients’ business performance by applying analytics to their business processes.  We’re already working on advanced analytics projects with a diverse set of clients including TD Bank, MTN South Africa, the New York State Department of Tax, and The Sentinel Group.

 

And third is Cloud Computing, an emerging model for delivering and consuming IT-enabled services.

 

Each of these three opportunities requires enterprise software, deep industry process knowledge, and solution integration capabilities where IBM is very strong.

 

And we will leverage our cash position to be opportunistic to accelerate our progress in the areas we believe will fuel growth and competitive differentiation in the future.

 

We’ll spend more time on these initiatives in our investor briefing in the middle of May.  But for now, I’ll get back to our first quarter performance.

 

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