RealTime IT News

Strong Geography Helps IBM Q1 Results

IBM  breezed past expectations for its first quarter of 2007, thanks to strong growth in Asia Pacific countries and Europe, especially in its global services division.

The tech bellwether reported a profit that rose by eight percent to $1.8 billion ($1.21 per diluted share) on revenues of 22.0 billion, an increase of four percent (with currency adjustments) over the first quarter of 2006.

Cash from recent acquisitions made the difference too, such as the $1.5 billion acquisition of security consultancy Internet Security Services by its global services division, and FileNet for enterprise content management.

Global services brought in $12.4 billion for the quarter, an improvement of about four percent over the first quarter of 2006. Within that consulting division, global technology services brought in $8.2 billion for the quarter, up by four percent, and IBM's global business services division grew by six percent to $4.2 billion in revenues.

IBM said it signed services contracts totaling $11.1 billion, down two percent year over year, and ended the first quarter with an estimated services backlog of $115 billion.

Geography mattered in these results, especially in the Asia Pacific region, which drove revenues up by nine percent over the same time last year to $4.5 billion.

"We had a spectacular quarter in Asia Pacific," said Mark Loughridge, chief financial officer of IBM. "We also had another strong quarter in Japan. I think that's a combination of obviously the local economy, but also our execution in the local [economies]," he said during a conference call on Tuesday to discuss the results.

Germany's sales were up by 10 percent in this quarter, a huge rebound for that country, he added. U.S.-based revenues made up about $9.1 billion of the results, but grew by only one percent. "The world trade units did a terrific job. We do have some work to do in the U.S.," he said, while noting that he's confident of better sales in Americas in the second quarter.

The software division continued showing its strength and strategic importance in IBM's overall strategy to remake itself as a services company. Sales in that division came in at $4.3 billion, an increase of five percent. Sales were driven by its WebSphere line of middleware products that IBM uses to underpin its robust Service Oriented Architecture (SOA)  consultancy business for enterprises.

Systems and technology, which includes hardware and storage, brought in $4.5 billion, which was about the same as the same time last year. High end servers were the best performers, such as in its system P and Z lines, which were up by 14 percent and 12 percent, respectively.

Samuel Palmisano, IBM's chairman, president and chief executive officer, said the results reflected IBM's focus on profitable growth areas. "We continued to grow in the higher-value products and services that help our clients transform their businesses. We again grew gross profit margins and earnings, and continued to generate significant cash from operations. This gives us considerable financial capability to strengthen our position in the profitable growth segments and create further value for our investors."

Shares of IBM were off by about 97 cents to $96.15 in after-hour trading after the results, which largely met analysts' expectations.