If the first cut is the deepest, what's the 21st feel like? For IBM
Revenues were up 5% year over year and flat if adjusting for currency, but net income per share saw a 16% surge. That kind of earnings boost through productivity gains is old hat for IBM, as the company has methodically increased operating margins from around 11% in 2004 to nearly 20% today through a focus on cost cuts, switching to high-margin areas of growth, and smart divestitures such as dropping out of the personal computer market.
So, aside from the never-ending cost-cutting that we're seeing from Big Blue, what did this quarter tell us about their business? For one, IBM's doing a good job of finding growth away from large enterprises which are still a bit tight on the purse strings. While IBM's largest industry by sales, financial services, saw revenue perform in line with the rest of the company, Big Blue received a significant boost from small and medium-sized clients. The company also highlighted a strong performance from growth markets, specifically BRIC countries, which saw a 14% year-to-year increase.
IBM's hardware-focused systems and technology group posted the largest revenue growth improvement from last year. Considering that researcher IDC pegged IBM as losing server market share to Hewlett-Packard
The software side also performed well, demonstrating how IBM continues to push margins in the face of a modest sales performance.
Finally, the weakest part of IBM's business was its outsourcing and consulting heavy segments. After the strong performance Infosys
So, it's business as usual at IBM. The company keeps trimming around the corners and increasing margins enough to keep earnings chugging along. While it'd be nice to see the top-line start inching forward a bit faster, the company is priced at only around 10.5 times forward earnings. Considering the breadth of services it offers, not even start-up hardware contender Oracle