IBM Posts Modest Third Quarter Growth

Global Services sales increased by 3%, hardware sales increased by 7%, and software sales increased by 5%.
Technology bellwether IBM on Monday reported a respectable, but hardly stellar, third quarter as revenues increased 4% year over year to $21.5 billion. Net income was $1.52 billion, excluding charges, compared to $1.55 billion a year ago. The company earned 94 cents per share, up from 92 cents in the third quarter of 2004. The 4% sales gain is based on numbers that do not include IBM's now divested PC business.

The company's closely watched Global Services business, which accounts for about half of its revenue, increased sales 3% to $11.7 billion, despite a new report that suggests that large outsourcing deals, in which IBM specializes, are becoming less popular among businesses. On Monday, research firm Technology Partners International said the total value of worldwide outsourcing deals could fall by as much as 10% to 15% this year to between $60 to $65 billion. TPI said the fall was due in part to a decline in long term deals and a cooling off of the business process outsourcing sector.

IBM's hardware sales increased 7% to $5.1 billion, not including the previous year's results from the PC business, which IBM sold to China's Lenovo Group. Sales of the company's iSeries midrange servers jumped 25%, but that was partly offset by a 4% decline in zSeries mainframe revenues.

Software sales increased 5% to 3.8 billion, with middleware brands such as Websphere, Tivoli, and Rational showing a 6% revenue gain. Sales of IBM's Lotus software, which includes the venerable Lotus Notes franchise, jumped 12%.