IBM's First-Quarter Sales Rise On Renewed IT Spending
Mainframes and WebSphere lead the way, while microelectronics business was the laggard.
IBM reported a 16% increase in first-quarter profits Thursday, as double-digit gains in hardware and software sales combined with favorable foreign-exchange rates to push ahead revenue. IBM's chief financial officer said customers are buying again, having worked off excess technology capacity from the '90s.
IBM earned $1.6 billion during the quarter ended March 31, compared with earnings of $1.4 billion during the same period last year. Revenue rose 11% to $22.2 billion. CFO John Joyce called analysts' 2004 estimates of $23.3 billion in revenue and earnings of $1.11 per share "reasonable."
Market-share gains came at the expense of Hewlett-Packard and Sun Microsystems, Joyce claimed, adding customers are spending more on IT after a period of lighter investment. "Their infrastructures are just getting old," he said during a conference call with analysts.
Mainframes and WebSphere software led the way. Hardware sales increased 16% during the quarter to $6.7 billion, with delivery of zSeries mainframe computing power doubling compared with the first quarter of 2003. Sales of the company's back-office WebSphere software jumped 24%, while overall software sales climbed nearly 11%, to $3.5 billion.
Revenue from IBM's services and consulting business rose more than 9%, to $11 billion. The company signed more than $10 billion in services contracts during the quarter. IBM also acquired two software companies: Candle Corp. and Trigo Technologies.
IBM's microelectronics business, however, continued to struggle. The unit, recently combined with IBM's systems business, would have lost $150 million on a standalone basis, according to Joyce. IBM expects the former technology group to turn a profit this year, but to do that, the company needs to increase semiconductor yields--the percentage of usable chips manufactured in a run.
As a result, the company boosted research and development spending by 14.4% in the quarter, to $1.37 billion. The increase was also associated with new product development, and won't be as sharp in the future, he added.
Shares of IBM closed Thursday up 27 cents at $93.97.
Separately, IBM said on Thursday that it signed a $300 million contract to manage Philips Consumer Electronics' North American customer-service activities.
Building A Mobile Business MindsetAmong 688 respondents, 46% have deployed mobile apps, with an additional 24% planning to in the next year. Soon all apps will look like mobile apps – and it's past time for those with no plans to get cracking.
Top IT Trends to Watch in Financial ServicesIT pros at banks, investment houses, insurance companies, and other financial services organizations are focused on a range of issues, from peer-to-peer lending to cybersecurity to performance, agility, and compliance. It all matters.
Join us for a roundup of the top stories on InformationWeek.com for the week of October 9, 2016. We'll be talking with the InformationWeek.com editors and correspondents who brought you the top stories of the week to get the "story behind the story."