If investors love predictability so much, you’d think they would have come to love IBM’s
The headline number for Big Blue was revenue of $23.7 billion, up only 2% from last year. IBM blamed $500 million of the revenue shortfall on currency effects. Predictably, the bottom line surged far ahead, moving net income 9% higher than last year. Once again, the company saw exceptional growth in BRIC markets, up 16% this quarter when eliminating currency effects.
All right, so the bad news is that, once again, revenues fell short. IBM’s made a living off producing outstanding profits while the top line moved at a slower pace. That’s been achieved by moving into higher-margin areas like services and software that can provide great profits on fewer sales.
In the software arena, IBM saw some key gains. Its middleware, which is basically plumbing software that connects different programs, saw solid growth. IBM claims to have taken market share in the segment, where its key rival is Oracle
In services, investors latched on to a 12% decline in services signings. Worrying? Perhaps, service rival Infosys
I can understand investors’ trepidations over IBM’s quarterly report. After Oracle’s earnings, Intel
Shifting alliances in IT are putting the company on a collision course with former partners. In networking, IBM’s having to move closer to Brocade
In the end, despite the threats, I still see IBM’s position as extremely safe and fortified. As no company can match the full breadth of IBM’s offerings, don’t look for IBM to be displaced too quickly. At the same time, don’t expect the lumbering giant to post blow-out revenue growth any time soon. Earnings growth on the other hand, that’s a completely different story.