Summary
For the first quarter ended March 31, 2005, IBM reported total revenue of $22.9 billion, a 3.3% increase year-over-year, or 0.7% adjusting for currency. Income from continuing operations was $1.407 billion, a 3.2% increase, resulting in diluted earnings per share (EPS) from continuing operations of $0.85, up 7.6%. The company adopted SFAS 123(R) in the quarter, which expensed share-based compensation, impacting EPS by approximately $0.10. Despite an overall increase in revenue and earnings, management noted a significant slowdown in March which impacted the quarter's performance more than expected, driven by Global Services shortfalls, elongated sales cycles, and delayed product availability. IBM's financial position showed a decrease in total assets to $104.9 billion from $111.0 billion at the end of 2004, largely due to reduced receivables and cash balances, the latter influenced by a significant $1.7 billion contribution to its U.S. pension plan. The company continued its share repurchase program, authorizing an additional $5.0 billion. Management is implementing actions to address recent performance softness and improve future execution.
Key Highlights
- 1Total revenue increased by 3.3% to $22.9 billion, with Global Services revenue up 6.1%.
- 2Income from continuing operations grew 3.2% to $1.407 billion, leading to diluted EPS of $0.85, a 7.6% increase.
- 3The company adopted SFAS 123(R) for share-based compensation, with a $0.10 impact on EPS.
- 4Total assets decreased to $104.9 billion, primarily due to lower receivables and cash balances, the latter impacted by a $1.7 billion pension contribution.
- 5Global Services signings declined by 4.5% to $10.0 billion, with a growing proportion from contract extensions.
- 6Hardware revenue was flat year-over-year, with mixed performance across segments including strong pSeries server growth but expected declines in zSeries.
- 7IBM announced an additional $5.0 billion share repurchase authorization and an increase in its quarterly dividend.