10-QPeriod: Q3 FY2003

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q3 Ended Sep 30, 2003

Filed November 10, 2003For Securities:IBM

Summary

IBM's third quarter and year-to-date 2003 results show a strong recovery and growth across key segments, particularly Global Services and Software. Total revenue for the third quarter increased by 8.6% year-over-year, reaching $21.5 billion, driven by robust demand in services and an expanded software portfolio following strategic acquisitions. Net income from continuing operations for the quarter was $1.8 billion, or $1.02 per diluted share. The company's "e-business on demand" strategy appears to be resonating with the market, despite cautious capital spending from large enterprises. The nine-month period demonstrated a significant improvement in profitability, with income from continuing operations reaching $4.9 billion. The company successfully integrated acquisitions, including Rational Software, which bolstered its software offerings. While hardware revenue saw a slight decline, performance in Systems Group servers and storage was positive. IBM's financial position remains solid, with substantial cash reserves and a manageable debt level, indicating continued financial strength and capacity for future investments and shareholder returns.

Key Highlights

  • 1Revenue for the third quarter of 2003 increased by 8.6% to $21.5 billion compared to the prior year, with a 4% increase at constant currency.
  • 2Net income from continuing operations for the third quarter was $1.8 billion, or $1.02 per diluted share, up from $1.7 billion ($0.99 per diluted share) in the same period last year.
  • 3Global Services revenue saw a significant increase of 16.7% year-over-year (11% at constant currency) in the third quarter, driven by strong performance in Strategic Outsourcing and Business Consulting Services.
  • 4Software revenue grew by 11.3% year-over-year (5% at constant currency) in the third quarter, boosted by the acquisition of Rational Software and strong performance in middleware.
  • 5Hardware revenue saw a slight decrease of 1.0% year-over-year (5% at constant currency), though Systems Group revenue increased by 5.6%.
  • 6Total assets grew to $97.2 billion, while total liabilities decreased to $70.0 billion, improving the company's financial leverage.
  • 7The company reported strong operating cash flow of $9.8 billion for the first nine months of 2003, indicating healthy cash generation.

Frequently Asked Questions

IBM reported a total revenue of $21.5 billion for the third quarter of 2003, an increase of 8.6% compared to the same period in 2002. Income from continuing operations was $1.8 billion, or $1.02 per diluted share, showing a solid year-over-year improvement.

The Global Services segment demonstrated robust growth, with revenue increasing 16.7% year-over-year, driven by strong demand in outsourcing and consulting services. The Software segment also performed well, with revenue up 11.3%, bolstered by the recent acquisition of Rational Software and growth in middleware products.

The Hardware segment experienced a slight revenue decrease of 1.0% year-over-year. While overall hardware revenue was down, the Systems Group showed positive performance with a 5.6% revenue increase, particularly in server and storage products. The company continues to navigate pricing pressures and shifts in demand within this segment.

IBM's financial position remains strong, with total assets at $97.2 billion and total liabilities at $70.0 billion as of September 30, 2003. The company ended the quarter with $6.17 billion in cash and marketable securities, indicating ample liquidity. Operating cash flow for the first nine months was robust at $9.8 billion, supporting investments and debt management.