Big Blue reports boffo numbers

Alex Salkever

Jul 16th 2009 at 5:20PM

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Filed under: Company News, Technology, Economy, Earnings

Software and IT services giant IBM Corp. (IBM) reported its second quarter earnings after the market closed today and investors cheered. Big Blue busted out boffo numbers and management raised earnings projections for the coming year. Shares were up more than 3 percent in aftermarket trading.

The numbers were impressive considering the sad state of the global economy. Net income of $3.1 billion constituted a 12 percent hop over the same period last year. Gross profit margin, a key indicator, was up 4.1 percent to 18.3 percent, a sign of continued strong management at the company. On the dark side, revenue was down by 13 percent to $23.2 billion over the same period last year. But that dark cloud was out shined by management's sunny outlook and revenue projection raise.

IBM stated it anticipates full-year 2009 earnings of no less than $9.70 per share, up from previous expectations of $9.20. For a company as large as IBM, a 5.5 percent increase in earnings guidance can be viewed as significant event. Equally important, IBM said it expects pre-tax income for its software segment to increase by double-digit percentages, an impressive growth rate in the sluggish economy

The IBM numbers lend more credence to the growing belief that the technology sector is in the midst of a robust recovery. However, IBM, which primarily supplies large and mid-sized corporations with software and services, seems to be faring better than Dell (DELL). The Round Rock (Texas) PC-maker, which competes with IBM in the services and enterprise computing markets, reported weak sales to corporations.

Currency conversion impacts muted the strength of IBM's numbers, however. In IBM's growth markets (primarily Asia and the developing world), the company showed a revenue decrease of 11 percent. Corrected for currency, those revenues actually increased one percent. Likewise, Dell's gross revenue decline of 12 percent, when corrected for currency distortions, was only 7 percent due to relative declines in local currencies versus the dollar.

Big Blue continued to make impressive inroads into the still growing Internet applications, remote applications delivery, and systems management market. Revenues from IBM's key information middleware products (WebSphere, Information Management, Tivoli, Lotus and Rational) rose by 5 percent, adjusting for currency, to $3 billion, as compared to the same period a year previous.