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IBM raises 2012 bar, despite weak second quarter

Ginni Rometty

Armonk: IBM has lifted its full year guidance, despite a fall in second quarter revenues, precipitated by a weak performance in its services business.

  • Second quarter net income up 6% to $3.9 billion
  • Revenue was $25.8 billion, down 3 percent, up 1 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
  • EMEA revenue down 9 percent, flat 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

IBM said yesterday that its second-quarter net income was $3.9 billion compared with $3.7 billion in the second quarter of 2011, an increase of 6 percent.

Total revenues for the second quarter of 2012 were $25.8 billion, down 3 percent (up 1 percent, adjusting for currency).

"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 Ginni Rometty, IBM president and chief executive officer.

"These are fundamental elements of our long-term business model.

"Looking ahead, we are well positioned to deliver greater value to a wider range of clients and to our shareholders. Given our performance in the first half and our outlook for the second half, we are raising our full-year operating earnings per share expectations."

Geographic Regions

In 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.

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

IBM's 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).

Year-To-Date 2012 Results

Net income for the six months ended June 30, 2012 was $6.9 billion compared with $6.5 billion in the first half of 2011, an increase of 6 percent.

Revenues for the six-month period totaled $50.5 billion, a decrease of 2 percent (up 1 percent, adjusting for currency) compared with $51.3 billion for the six months of 2011.

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