IBM posts broad Q3 revenue growth

IBM posted quarterly results showing 9% revenue growth from last year and slight earnings growth, despite a $320m (£177m) charge...

IBM posted quarterly results showing 9% revenue growth from last year and slight earnings growth, despite a $320m (£177m) charge it took during the quarter to settle some claims in a lawsuit over its pension plan.

IBM's Global Financing revenue dropped 11% from last year's third quarter, but all of IBM's other business lines showed revenue growth, contributing to total revenue from continuing operations for the quarter of $23.4bn. IBM had net income for the quarter of $1.8bn, up 1% from last year's third quarter.

IBM's Hardware group showed the strongest growth, with revenue increasing 12% to $7.5bn. Global Services remained IBM's most lucrative unit, with revenue of $11.4bn, up 10%.

Servers based on processors with the x86 instruction set, such as Intel's Xeon chip, were the fastest growing component of IBM's hardware business, with revenues up 26% year-over-year. This growth was driven in part by strong sales of the company's blade systems, which grew at more than 140% during the quarter, according to Mark Loughridge, IBM's senior vice-president and chief financial officer.

The company's pSeries Unix and iSeries minicomputer product lines did not fare as well, despite the introduction of new systems for both families based on IBM's next-generation Power5 microprocessor. The transition of iSeries customers to the new systems, in particular, was an "issue," with revenue from that product line dropping 26% from last year's figures, Loughridge said.

Global revenue from pSeries servers was up only 1% from the year-ago quarter. Sales were particularly hard hit in Europe, where revenue from the Unix systems declined 17%.  Revenue for pSeries was up by 9% in the Americas and 8 percent in the Asia-Pacific region.

The Global Services group suffered a high-profile setback in September when JPMorgan Chase cancelled the remaining five years of a seven-year outsourcing deal valued at $5bn, but IBM said at the time the cancellation would not affect its financials for the quarter.

IBM said it had signed $10bn in services contracts during the quarter and now has a backlog of $110bn in contracted future services. That's a slight decrease from IBM's $118bn backlog at the end of its second quarter.

IBM signed eight Global Services deals valued at more than $100m during the quarter, including one deal valued at over $1bn, Loughridge said.

IBM's Software group increased its revenue to $3.6bn, up 5% from last year's third quarter, with revenue for IBM's Tivoli infrastructure software growing 19% and its DB2 database software growing 15%. Revenue from Lotus, IBM's collaboration and messaging software, dropped 6%.

"After a difficult end to the second quarter, demand rebounded in the Americas and Asia, fueled in part by an increase in large deals," Loughridge said of IBM's software business.

Stacy Cowley & Robert McMillan write for IDG News Service

Read more on Business applications