IBM reports 2011 second quarter results

IBM today announced second-quarter 2011 diluted earnings of $3.00 per share, compared with diluted earnings of $2.61 per share in the second quarter of 2010, an increase of 15 percent. Operating (non-GAAP) diluted earnings were $3.09 per share, compared with operating diluted earnings of $2.62 per share in the second quarter of 2010, an increase of 18 percent.

Second-quarter net income was $3.7 billion compared with $3.4 billion in the second quarter of 2010, an increase of 8 percent. Operating (non-GAAP) net income was $3.8 billion compared with $3.4 billion in the second quarter of 2010, an increase of 11 percent.

Total revenues for the second quarter of 2011 of $26.7 billion increased 12 percent (5 percent, adjusting for currency) from the second quarter of 2010.

"In the second quarter our long-term strategic investments in the company's growth initiatives again helped drive strong revenue performance," said Samuel J. Palmisano, IBM chairman, president and chief executive officer. "Hardware, software and services revenue grew at double digits, and we achieved strong profit and free cash flow growth.

"As IBM begins its second century, we continue a process of transformation, positioning the company to lead in the future and deliver higher value to our clients and our shareholders. Given our strong start to 2011, we are raising our full-year operating earnings per share expectations to at least $13.25."

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

Second-quarter operating (non-GAAP) diluted earnings exclude $0.09 per share of net charges: $0.10 per share for the amortization of purchased intangible assets and other acquisition-related charges, offset by ($0.01) per share for retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

Full-Year 2011 Expectations

IBM raised its expectations for full-year 2011 GAAP diluted earnings per share to at least $12.87 from at least $12.73; and operating (non-GAAP) diluted earnings per share to at least $13.25 from at least $13.15. The 2011 operating (non-GAAP) earnings exclude $0.38 per share of charges for amortization of purchased intangible assets, other acquisition-related charges, and retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

Geographic Regions

The Americas’ second-quarter revenues were $11.2 billion, an increase of 10 percent (8 percent, adjusting for currency) from the 2010 period. Revenues from Europe/Middle East/Africa were $8.6 billion, up 16 percent (3 percent, adjusting for currency). Asia-Pacific revenues increased 14 percent (3 percent, adjusting for currency) to $6.2 billion. OEM revenues were $674 million, flat (down 1 percent, adjusting for currency) compared with the 2010 second quarter.

Growth Markets

Revenues from the company’s growth markets increased 23 percent (13 percent, adjusting for currency). Revenues in the BRIC countries -- Brazil, Russia, India and China -- increased 27 percent (21 percent, adjusting for currency). Growth markets revenue represents 22 percent of IBM’s total geographic revenue for the second quarter.

Services

Total Global Services revenues increased 10 percent (2 percent, adjusting for currency). Global Technology Services segment revenues increased 11 percent (3 percent, adjusting for currency) to $10.2 billion. Global Business Services segment revenues were up 9 percent (1 percent, adjusting for currency) at $4.9 billion.

Global Services pre-tax income increased to $2.2 billion, up 4 percent year over year. Pre-tax income from Global Technology Services increased 1 percent; pre-tax income growth was reduced by 7 points as a result of increased workforce rebalancing expenses. Global Business Services pre-tax income increased 11 percent.

The estimated services backlog at June 30 was $144 billion, up $15 billion year over year at actual rates ($2 billion, adjusting for currency). Services backlog at the end of a quarter measures the current value of work under contract expected to be recognized as revenue in future quarters.

Software

Revenues from the Software segment were $6.2 billion, an increase of 17 percent (10 percent, adjusting for currency). Software pre-tax income of $2.3 billion was up 12 percent year over year.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $3.9 billion, an increase of 21 percent (14 percent, adjusting for currency) versus the second quarter of 2010. Operating systems revenues of $630 million increased 16 percent (9 percent, adjusting for currency) compared with the prior-year quarter.

Revenues from the WebSphere family of software products increased 55 percent year over year. Information Management software revenues increased 18 percent. Revenues from Tivoli software increased 9 percent. Revenues from Lotus software increased 12 percent, and Rational software increased 4 percent.

Hardware

Revenues from the Systems and Technology segment totaled $4.7 billion for the quarter, up 17 percent (12 percent, adjusting for currency) from the second quarter of 2010. Systems and Technology pre-tax income was $393 million, an increase of 112 percent year over year.

Systems revenues increased 20 percent (13 percent, adjusting for currency). Revenues from System z mainframe server products increased 61 percent compared with the year-ago period. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), increased 86 percent. Revenues from Power Systems increased 12 percent compared with the 2010 period. Revenues from System x increased 15 percent. Revenues from System Storage increased 10 percent, and revenues from Retail Store Solutions increased 8 percent year over year. Revenues from Microelectronics OEM increased 4 percent.

Financing

Global Financing segment revenues decreased 5 percent (11 percent, adjusting for currency) in the second quarter to $519 million. Pre-tax income for the segment increased 7 percent to $496 million.