IBM Q1 Profit Jumps 13%, Guidance Raised

Strong gains in services, software and hardware sales help Big Blue handily beat Street estimates.
IBM on Tuesday reported solid gains across all its major product lines in the first quarter and raised its earnings outlook for the current year.

For the period ended March 30, IBM said total revenue was up 8% year-over-year, to $24.6 billion, while non-GAAP earnings per share rose 21%, to $2.41. Net income increased 13%, to $3 billion.

The results easily surpassed predictions by Wall Street analysts, who on average expected Big Blue to report EPS of $2.30 on revenue of $24.01 billion. Based on its strong start to the year, IBM raised full-year, non-GAAP EPS guidance to at least $13.15, from previous guidance of at least $13.00.

"We delivered a strong first quarter with revenue growth across hardware, software, and services and with more than 40 countries growing in double digits," said IBM chairman and CEO Sam Palmisano, in a statement.

IBM's results were impressive across the board.

Revenues from the company's Global Technology Services IT outsourcing unit rose 6% year-over-year, to $9.9 billion, while the Global Business Services BPO unit saw a 7% sales gain, to $4.7 billion. IBM also said its total services backlog increased by $8 billion, to $142 billion.

Total software revenues were up 6%, to $5.3 billion, driven by strong increases in what IBM calls its "key middleware" portfolio, which consists of products from the WebSphere, Information Management, Tivoli, Lotus, and Rational lines.

Hardware sales were also strong, up 19% to $4 billion. Leading the way was IBM's System z mainframe, revenue from which was up 41%. Sales of the company's Power servers, which run AIX and Linux, rose 19%, while its industry standard System x line saw a 13% gain. Storage sales were up 10%.

"We continued to see excellent momentum in our growth initiatives—Smarter Planet, cloud, business analytics, and growth markets—which bring together the full value of the IBM portfolio. We achieved broad-based margin improvement, while our cash flow and strong financial position enabled us to return value to our shareholders," Palmisano said.