IBM software sales help spur 'powerful' $26.8 B quarter
Even with the current slowdown in spending on information technology, IBM's net income grew 13 percent to $26.8 billion for the second quarter of this year, driven largely by booming sales in software and services.
"I've got to say that this is one of the best quarters I've ever seen -- and remember, we delivered an outstanding second quarter a year ago. So these are truly powerful results," contended Mark Loughridge, IBM's CFO and senior VP, during a conference call with analysts.
IBM's net income stepped up 22% to $2.8 billion for the quarter. Software revenues -- accounting for $5.6 billion of IBM's $26.8 billion in revenues -- were up 17% this quarter over the same quarter a year ago. Middleware products -- making up the lion's share of IBM's software sales -- also grew 17%, to a total of $4.3 billion.
Loughridge cited companies' interest in personal productivity as a significant factor in the software gains. "Customers continued to invest to improve the personal productivity of their workforce," he told the analysts.
But key software acquisitions also played a major role. IBM's Rational unit, which now includes the recently acquired Telelogic, rose 37% in revenue. Similarly, revenues for information management software, now augmented by IBM's buyout of business intelligence (BI) specialist Cognos, gained 30%.
Revenue growth for other IBM software products amounted to 21% for Lotus and 9% each for IBM's WebSphere middleware and Tivoli systems management software.
Yet although acquisitions of software companies require an investment, the buyouts can also bring new customers with them. In the case of a huge, diversified IT vendor such as IBM, software growth can also help to fuel growth in services and hardware sales.
"At the same time, our services momentum continued with great revenue growth, signings growth, and margin expansion. This is the fourth consecutive quarter that [IBM] Global Services revenue growth has been above our longer term objectives. Signings were $14.7 billion at actual rates, up 12 percent," Loughridge said.
"We signed 13 deals larger than $100 million and our backlog was an estimated $117 billion at constant currency, up $1 billion year to year."
IBM also saw large revenue gains from sales of some hardware products, including a 32% increase for System z mainframes and a 29% improvement for System p.
Loughridge also emphasized the wide geographic spread of IBM's revenue increases in the quarter -- amounting to 5% in the US, 8% for the Americas in general, 16% in the Asia-Pacific region, and 20% in Europe, Middle East and Africa (EMEA).