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IBM raises outlook after strong quarter.

Ginni Rometty

Armonk: IBM yesterday raised its full year outlook after it posted a 15 per cent rise in first quarter earnings to March 31st — despite weak performances in its consulting operation, Global Business Services, and in its EMEA region.

The company said that revenue was flat at $24.7 billion compared with the previous year and net earnings were up 7 per cent at $3.1 billion in the first three months of the year — on strong demand for its software services and growth in emerging markets.

IBM raised its full year target to at least $15 adjusted earnings per shape from previously at least $14.85.

Quarter Highlights:

  • Diluted EPS: GAAP: $2.61, up 13 percent; Operating (non-GAAP): $2.78, up 15 percent;
  • Net income: GAAP: $3.1 billion, up 7 percent; Operating (non-GAAP): $3.3 billion, up 9 percent;
  • Gross profit margin: GAAP: 45.1 percent, up 0.9 points; Operating (non-GAAP): 45.7 percent, up 1.2 points;
  • Revenue: $24.7 billion, flat, up 1 percent adjusting for currency;
  • Services revenue up 1 percent: Services pre-tax income up 11 percent;
  • Services backlog of $139 billion, down 2 percent, up 1 percent adjusting for currency;
  • Growth markets revenue up 9 percent;
  • Business analytics revenue up 14 percent;
  • Full-year 2012 operating (non-GAAP) EPS expectations raised to at least $15.00 from at least $14.85.

"In the first quarter, we drove strong profit and earnings per share growth. We delivered another excellent software performance, expanded services margins, and continued the momentum in our growth initiatives," said Ginni Rometty, IBM president and chief executive officer. "Our investments in growth market countries continued to generate strong revenue growth across software, hardware and services while contributing to the company's ongoing margin expansion.

"Based on this performance, we are raising our 2012 full-year operating earnings per share expectations to at least $15.00."

Geographic Regions

The Americas' first-quarter revenues were $10.5 billion, an increase of 1 percent (up 2 percent, adjusting for currency) from the 2011 period. Revenues from Europe/Middle East/Africa were $7.6 billion, down 2 percent (up 1 percent, adjusting for currency). Asia-Pacific revenues increased 4 percent (up 1 percent, adjusting for currency) to $6.1 billion. OEM revenues were $509 million, down 17 percent compared with the 2011 first quarter.

Growth Markets

Revenues from the company's growth markets increased 9 percent (up 9 percent, adjusting for currency) and 40 countries had double digit revenue growth at constant currency. Revenues in the BRIC countries — Brazil, Russia, India and China — increased 10 percent (up 11 percent, adjusting for currency).

Services

Global Technology Services segment revenues increased 2 percent (up 3 percent, adjusting for currency) to $10.0 billion. Global Business Services segment revenues were down 2 percent (down 1 percent, adjusting for currency) to $4.6 billion.

Pre-tax income from Global Technology Services increased 20 percent and pre-tax margin increased to 14.3 percent. Global Business Services pre-tax income decreased 6 percent and pre-tax margin decreased to 12.5 percent.

The estimated services backlog at March 31 was $139 billion, down 2 percent year over year at actual rates (up 1 percent, adjusting for currency). Services backlog at the end of a quarter measures the current value of work under contract expected to be recognized as revenue in future quarters.

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