10-QPeriod: Q3 FY2008

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q3 Ended Sep 30, 2008

Filed October 28, 2008For Securities:IBM

Summary

International Business Machines Corporation (IBM) reported strong financial results for the third quarter and first nine months of 2008, demonstrating resilience in a challenging economic environment. Total revenue saw a notable increase, driven by robust growth in its Software and Global Services segments, particularly in emerging markets. The company's strategic focus on productivity and efficiency improvements contributed to enhanced gross profit margins. IBM's financial position remained strong, supported by significant cash reserves and access to credit facilities. The company continued its commitment to returning value to shareholders through dividends and share repurchases, while also making strategic acquisitions to bolster its software portfolio. Despite global economic headwinds, IBM showcased its ability to adapt and grow by leveraging its diversified business model and global reach.

Financial Highlights

25 data points
Beta

Revenue

$25.30B

43.3% Gross Margin

Net Income

$2.82B

11.2% Net Margin

EPS (Diluted)

$2.04

Cash & Equivalents

$9.76B

Free Cash Flow

$3.74B

Financial Statements
Beta
Revenue$25.30B
Cost of Revenue$14.34B
Gross Profit$10.96B
R&D Expenses$1.58B
SG&A Expenses$5.64B
Interest Expense$159.00M
Net Income$2.82B
EPS (Basic)$2.08
EPS (Diluted)$2.04
Shares Outstanding (Basic)1.36B
Shares Outstanding (Diluted)1.38B

Key Highlights

  • 1Total revenue increased by 4.9% year-over-year to $25.3 billion for the third quarter and 9.6% to $76.6 billion for the first nine months.
  • 2Net income rose significantly by 19.6% to $2.82 billion for the third quarter and 22.3% to $7.91 billion for the nine months.
  • 3Diluted earnings per share from continuing operations increased by 22.0% to $2.05 for the third quarter and 28.5% to $5.68 for the nine months.
  • 4Software segment revenue grew by 11.8% in the third quarter and 14.2% year-to-date, highlighting strong performance and contributions from acquisitions.
  • 5Global Services revenue saw a solid increase of 7.9% for the third quarter and 13.6% for the nine months, with strong profit performance driven by operational efficiencies.
  • 6The company completed 13 acquisitions during the first nine months, totaling $6.45 billion, with significant contributions from Cognos and Telelogic.
  • 7Cash flow from operating activities increased by $1.25 billion for the first nine months, reaching $12.19 billion, reflecting strong operational performance.

Frequently Asked Questions

For the third quarter of 2008, IBM's total revenue was $25.3 billion, a 4.9% increase compared to the same period in 2007. Adjusted for currency, the growth was 1.7%. For the first nine months of 2008, total revenue was $76.6 billion, a 9.6% increase year-over-year. Adjusted for currency, the growth was 3.7%.

IBM's Software segment showed strong growth, with revenue up 11.8% in the third quarter and 14.2% year-to-date. The Global Services segment also performed well, with revenue increasing 7.9% in the third quarter and 13.6% year-to-date, driven by strong profit and operational efficiencies. The Systems and Technology segment saw a revenue decrease of 9.5% in the third quarter, partly due to a slowdown in transactions, though System z and System p showed growth.

IBM maintained a strong financial position with approximately $10 billion in cash on hand at the end of the third quarter. The company also issued $4 billion in long-term debt on October 15, 2008, and had access to a $10 billion global credit facility. Cash flow from operating activities increased by $1.25 billion for the first nine months to $12.19 billion, demonstrating robust cash generation.

Yes, IBM completed 13 acquisitions during the first nine months of 2008, totaling $6.45 billion. Key acquisitions highlighted include Cognos, Inc. for $5.02 billion, integrated into the Software segment, and Telelogic, AB for $885 million, also added to the Software segment.