IBM turnover up just 2 percent in Q2

IBM has announced second-quarter profits up 9 percent year-on-year, with increased sales in the US and Asia helping to offset weaker spending in Europe.

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IBM has announced second-quarter profits up 9 percent year-on-year, with increased sales in the US and Asia helping to offset weaker spending in Europe.

Net profit for the quarter ended 30 June was $3.4 billion (£2.2 billion), up from $3.1 billion in the same quarter last year, IBM said. Turnover was less impressive at $23.7 billion (£15.5 billion), up 2 percent year on year.

IBM dismissed analyst concerns that the slow growth in turnover might be an indication of a slower general economic recovery. Big Blue put the figure down to the impact of the higher value of het dollar.

Mark Loughridge, IBM chief Financial Officer said there was “certainly not a pull-back in (corporate) spending during the quarter.

IBM also raised its earnings outlook for the year to at least $11.25 per share, up $.05 from its previous guidance.

Big Blue expects to achieve that through a shift to selling more high-value products and the rollout of new mainframes and Power-based systems later this year, among other factors, CEO Samuel Palmisano said in a statement.

Second-quarter software revenue was up 2 percent, or 6 percent when taking into account the recent divestiture of IBM's project lifecycle management business, the company said.

Global services revenue also increased by 2 percent, but the segment contained one notable weak spot: Contract signings in the quarter fell 12 percent to $12.3 billion, an indication that companies could be slowing down on new IT projects amid fresh uncertainties in the global economy, such as the European debt crisis.

However, IBM also signed 15 services pacts during the quarter worth more than $100 million, up from 13 in the previous quarter.

Revenue from IBM's Systems & Technology segment, including its server hardware, increased by 3 percent. Sales of its industry-standard System x servers jumped 30 percent, but revenue from Power systems was down 10 percent, and System z mainframe sales fell 24 percent.

IBM is facing a fresh challenge in hardware from Oracle, which entered the business via its acquisition of Sun Microsystems.

Sales of some hardware products may have fallen because customers are waiting for upcoming product releases, Loughridge said during a conference call.

For example, its next System Z mainframe is "not just a new Z," according to Loughridge. "It's a Z in a 'system of systems' implementation."

IBM has scheduled a press conference on Thursday in New York City, where it's expected to provide details about its next mainframe.

The results were mixed on a geographic basis. Revenue increased by 3 percent in the Americas to $10.2 billion, and by 9 percent in the Asia-Pacific to $5.4 billion, but sales were down 6 percent in Europe, the Middle East and Africa, to $7.4 billion, IBM said.

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