10-QPeriod: Q1 FY2008

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q1 Ended Mar 31, 2008

Filed April 29, 2008For Securities:IBM

Summary

International Business Machines Corporation (IBM) reported strong financial results for the first quarter ended March 31, 2008. Total revenue increased by 11.2% year-over-year to $24.5 billion, with significant contributions from the Global Services segments (Global Technology Services and Global Business Services), which saw double-digit revenue growth. The Software segment also performed well, with a 14.0% increase in revenue, bolstered by strong demand for middleware and the recent acquisition of Cognos. Net income rose by 25.7% to $2.3 billion, translating to diluted earnings per share of $1.65, a 36.4% increase from the prior year. This performance reflects IBM's balanced operating model, effective cost management, and disciplined investment in growth opportunities. The company also highlighted its expanding global reach, with emerging markets showing robust growth. Cash flow from operations improved significantly, driven by increased net income and better working capital management, despite substantial investments in acquisitions, particularly Cognos.

Key Highlights

  • 1Total revenue for Q1 2008 grew 11.2% to $24.5 billion, driven by strong performance in Global Services and Software segments.
  • 2Net income increased by 25.7% to $2.3 billion, with diluted EPS reaching $1.65, up 36.4% year-over-year.
  • 3Global Services (GTS and GBS) combined revenue increased 17.3% to $14.6 billion, indicating robust client demand for IT solutions and services.
  • 4The acquisition of Cognos for $5.02 billion was completed, significantly contributing to the Software segment's revenue and goodwill.
  • 5Cash flow from operations was strong, increasing by $1.2 billion to $4.2 billion, reflecting improved profitability and working capital management.
  • 6IBM continued its capital deployment strategies, returning $3.0 billion to shareholders through dividends and share repurchases.
  • 7Revenue from emerging markets showed strong growth, highlighting IBM's successful expansion into these key regions.

Frequently Asked Questions

IBM's total revenue for the first quarter ended March 31, 2008, was $24.5 billion, an increase of 11.2% compared to $22.0 billion in the same period of 2007. Excluding currency impacts, revenue grew 3.9%.

IBM completed the acquisition of Cognos, Inc. for $5.02 billion on January 31, 2008. This acquisition significantly contributed to the Software segment's revenue growth and resulted in an increase in goodwill on the balance sheet. Cognos acquisition added approximately 1% to the company's overall revenue growth in the quarter.

The Global Services segment, comprising Global Technology Services (GTS) and Global Business Services (GBS), showed strong performance. Combined revenue increased by 17.3% year-over-year to $14.6 billion, with both GTS and GBS reporting double-digit growth. This was driven by demand for annuity-based services and a broad portfolio of offerings.

IBM generated $4.2 billion in cash from operating activities, an increase of $1.2 billion compared to the prior year, driven by higher net income and improved working capital. The company returned $3.0 billion to shareholders through dividends ($554 million) and share repurchases ($2.4 billion). Investment activities were heavily influenced by the Cognos acquisition, totaling $5.8 billion in net cash used.