IBM has continued to defy the recession by posting a
double-digit rise in profits largely on the back of software and
services.
The third-quarter ended 30 September saw IBM increase net
profits to $3.2bn, up 13.6% on the same period in 2008.
Sales went up 1% sequentially to $23.6bn but dipped 7% on a
yearly comparison, though for Q4 the company expects revenues to go
up on an annualised basis.
IBM CFO Mark Loughridge said the results were the result of
"shifting to higher value areas" over the past few years, but he
also noted that the economy was settling down.
"What we see more broadly is some stabilisation in the economic
environment and one of the indicators of that stabilisation is that
credit markets have improved on a year-to-year basis," he said in a
teleconference with analysts.
The bottom line was bolstered by an 11% rise in pre-tax profits
for the combined services operation to $2.13bn and a 21% rise in
pre-tax earnings for the software business to $1.85bn.
Cost-cutting measures also helped; IBM expects to hack $3.5bn
from an estimated spend base of $90bn and reckons it could get rid
of more.
Global Technology Services revenues were down 2% to $9.4bn and
down 11% to $4.3bn in Global Business Services. All major families
in the software portfolio grew, aside from Lotus, delivering sales
of $5.1bn.
Loughridge said he expected software and services each to
generate $8bn in profit for the whole of 2009. "That is one of the
best indictors of the substantial transformation that we've seen in
our business," he said.
Revenues at the Systems and Technology arm fell 11% to $3.9bn
and pre-tax profits were $225m. Only System x posted sales growth
in the unit, as revenues for System z, Converged System p, storage
and retail store solutions declined.
All of this bodes well for the next quarter, said Big Blue,
which expects to return to yearly growth in Q4.
"In a stable-to-improving environment, at the current spot
rates, IBM expects to return to revenue growth at actual rates in
the fourth quarter," said Loughridge.