IBM 2Q Financial Call: Is Server Business Sale To Lenovo On Hold?

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IBM reported a GAAP second-quarter profit of $4.3 billion, up 3 percent over last year, and earnings per share of $3.81, up 8 percent. On a non-GAAP basis, profit was reported at $3.6 billion, down 12 percent, and earnings per share fell 8 percent to $3.22. IBM attributed the drop in non-GAAP earnings to charges related to workforce reductions in the quarter.

Software revenue rose 4 percent over last year, with branded middleware up 9 percent. IBM's Loughridge said the company has a very good software pipeline going forward. "We see real momentum going from that second quarter into the second half of the year," he said.

Services revenue was down 4 percent for the quarter, but IBM reported a services backlog of $141 billion, which is up 3 percent over last year.

Total IBM systems and technology revenue for the quarter fell 12 percent, or 8 percent if the company's retail store solutions sales were not included. The hardware revenue drop was led by a 25-percent drop in Power Systems sales, an 11 percent drop in System x sales, and a 7 percent drop in storage sales. The only real bright spot in terms of IBM's branded hardware sales was its System z, sales of which rose 10 percent over last year. The company also reported a 6 percent rise in its microelectronics OEM business.

Loughridge said that IBM's PureSystems converged infrastructure solutions have done well since they were introduced about a year ago, with customers purchasing over 6,000 units so far.


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