IBM's revenue down 5 pc in 1Q13; hardware sales dip

BANGALORE, INDIA: IBM announced first-quarter net income was $3.0 billion, down one per cent year-to-year. Operating (non-GAAP) net income was $3.4 billion compared with $3.3 billion in the first quarter of 2012, an increase of three per cent. Total revenues for the first quarter of 2013 of $23.4 billion were down five per cent from the first quarter of 2012.

"In the first quarter, we grew operating net income, earnings per share and expanded operating margins but we did not achieve all of our goals in the period. Despite a solid start and good client demand we did not close a number of software and mainframe transactions that have moved into the second quarter. The services business performed as expected with strong profit growth and significant new business in the quarter," said Ginni Rometty, IBM chairman, president and chief executive officer.

Revenues from the Systems and Technology segment totaled $3.1 billion for the quarter, down 17 per cent from the first quarter of 2012. Excluding Retail Store Solutions (RSS), revenues were down 14 percent (down 13 percent, adjusting for currency). Systems and Technology pre-tax loss increased $0.3 billion.

Total systems revenues, excluding RSS, decreased 13 per cent (down 13 per cent, adjusting for currency). Revenues from System z mainframe server products increased 7 percent compared with the year-ago period. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), increased 27 per cent. Revenues from Power Systems were down 32 per cent compared with the 2012 period. Revenues from System x were down 9 per cent. Revenues from System Storage decreased 11 per cent. Revenues from Microelectronics OEM decreased 16 per cent.

"Looking ahead, in addition to closing those transactions, we expect to benefit from investments we are making in our growth initiatives and from the actions we are taking to improve under-performing parts of the business. We remain confident in this model of continuous transformation and in our ability to deliver our full-year 2013 operating earnings per share expectation of at least $16.70."

First-Quarter GAAP - Operating (non-GAAP) Reconciliation

First-quarter operating (non-GAAP) diluted earnings exclude $0.30 per share of charges: $0.12 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.18 per share for retirement-related charges.

Full-Year 2013 Expectations

IBM is reiterating its expectation for full-year 2013 GAAP diluted earnings per share of at least $15.53. Operating (non-GAAP) diluted earnings per share expectations remain at least $16.70. The 2013 operating (non-GAAP) earnings expectations exclude $1.17 per share of charges for amortization of purchased intangible assets, other acquisition-related charges, and retirement-related charges.

Geographic Regions

The Americas' first-quarter revenues were $10.0 billion, a decrease of 4 per cent (down 3 per cent, adjusting for currency) from the 2012 period. Revenues from Europe/Middle East/Africa were $7.3 billion, down 4 per cent (down 4 per cent, adjusting for currency). Asia-Pacific revenues decreased 7 per cent (down 1 per cent, adjusting for currency) to $5.7 billion. OEM revenues were $426 million, down16 per cent compared with the 2012 first quarter.

Growth Markets

Revenues from the company's growth markets decreased 1 percent (up 1 per cent, adjusting for currency). Revenues in the BRIC countries - Brazil, Russia, India and China - decreased 1 per cent (up 3 per cent, adjusting for currency).

Services

Global Technology Services segment revenues decreased 4 per cent (down 2 percent, adjusting for currency) to $9.6 billion. Global Business Services segment revenues were down 3 per cent (flat, adjusting for currency) to $4.5 billion.

Pre-tax income from Global Technology Services was up 7 per cent and pre-tax margin increased to 16.1 percent. Global Business Services pre-tax income increased 17 percent and pre-tax margin increased to 15.1 percent.

The estimated services backlog at March 31 was $141 billion, up 1 percent year over year at actual rates (up 5 percent, adjusting for currency). The company closed 22 service agreements of more than $100 million in the quarter.

Software

Revenues from the Software segment were flat at $5.6 billion (up 1 per cent, adjusting for currency) compared with the first quarter of 2012. Software pre-tax income increased 4 per cent and pre-tax margin increased to 31.5 per cent.

Revenues from IBM's key middleware products, which include WebSphere, Information Management, Tivoli, Social Workforce Solutions (formerly Lotus) and Rational products, were $3.5 billion, up 1 per cent versus the first quarter of 2012. Operating systems revenues of $578 million were down 2 per cent compared with the prior-year quarter.

Revenues from the WebSphere family of software products increased 6 percent year over year. Information Management software revenues decreased 2 percent. Revenues from Tivoli software increased 1 percent. Revenues from Social Workforce Solutions (formerly Lotus) software increased 8 percent, and Rational software decreased 2 percent.

Financing

Global Financing segment revenues were up 2 per cent (up 4 per cent, adjusting for currency) in the first quarter at $499 million. Pre-tax income for the segment increased 5 per cent to $538 million.