10-QPeriod: Q2 FY2009

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 28, 2009For Securities:IBM

Summary

International Business Machines Corporation (IBM) reported its second quarter and year-to-date results for 2009. Despite a challenging global economic environment, IBM demonstrated resilience with strong profit growth driven by margin expansion and a robust cash position. The company's strategic transformation, shifting towards higher-value solutions and global integration, continued to yield positive results, reducing the fixed cost base and improving operational efficiency. While total revenue saw a decline primarily due to currency headwinds and the economic climate, net income and earnings per share saw significant year-over-year increases, signaling effective cost management and a favorable shift in revenue mix. Key growth areas such as strategic outsourcing and branded middleware showed promising performance, indicating the company's ability to adapt and thrive in a difficult economic landscape. The company's financial position remains strong, with a solid cash flow from operations and a significant cash and marketable securities balance, providing ample flexibility for future investments and shareholder returns. IBM continues to prioritize strategic investments in areas like Smarter Planet solutions, business analytics, and cloud computing, aligning with its long-term strategy to deliver value to clients and shareholders. The company also raised its full-year 2009 earnings per share projection, reflecting confidence in its ongoing strategic execution and market positioning.

Financial Highlights

46 data points
Beta

Revenue

$23.25B

45.5% Gross Margin

Net Income

$3.10B

13.3% Net Margin

EPS (Diluted)

$2.32

Total Assets

$103.66B

Cash & Equivalents

$11.68B

Free Cash Flow

$4.74B

Financial Statements
Beta
Revenue$23.25B
Cost of Revenue$12.67B
Gross Profit$10.58B
R&D Expenses$1.43B
SG&A Expenses$5.12B
Interest Expense$101.00M
Net Income$3.10B
EPS (Basic)$2.34
EPS (Diluted)$2.32
Shares Outstanding (Basic)1.33B
Shares Outstanding (Diluted)1.34B

Key Highlights

  • 1For the second quarter of 2009, IBM reported diluted EPS of $2.32, an increase of 17.8% compared to the prior year, and total revenue of $23.25 billion, down 13.3% as reported (6.8% adjusted for currency).
  • 2Net income for the quarter rose 12.2% to $3.10 billion, with net income margin expanding to 13.3% from 10.3% in Q2 2008.
  • 3Gross profit margin improved to 45.5% from 43.2% in the prior year's quarter, driven by margin expansion in Global Technology Services, Software, and Global Business Services.
  • 4Strategic outsourcing signings increased significantly by 27.0% (38% adjusted for currency), indicating strong client demand for these services.
  • 5The company generated $4.74 billion in cash flow from operating activities in the second quarter, an increase of $490 million year-over-year.
  • 6IBM raised its full-year 2009 diluted EPS projection to at least $9.70, up from a previous projection of at least $9.20.
  • 7Acquisitions like Cognos and Telelogic demonstrated strong performance, contributing to the company's higher-value capabilities.

Frequently Asked Questions

IBM's total revenue for the second quarter of 2009 was $23.25 billion, a decrease of 13.3% as reported and 6.8% adjusted for currency, compared to $26.82 billion in the second quarter of 2008. This decline was primarily attributed to the challenging global economic environment and currency fluctuations.

The increase in diluted EPS to $2.32 (up 17.8% year-over-year) was driven by a combination of factors, including strong profit growth fueled by margin expansion, effective expense management, a favorable tax rate, and a reduction in the weighted-average number of outstanding shares due to the company's ongoing common share repurchase program.

Most segments experienced revenue declines. Global Technology Services revenue decreased by 9.8% (2% adjusted for currency), Global Business Services by 15.0% (9% adjusted for currency), Software by 7.3% (flat adjusted for currency), Systems and Technology by 26.0% (22% adjusted for currency), and Global Financing by 10.5% (4% adjusted for currency).

IBM raised its full-year 2009 diluted earnings per share projection to at least $9.70, indicating confidence in its strategic execution and ability to navigate the economic downturn. The company's ongoing transformation, focus on higher-value segments, and disciplined cost management are expected to continue driving profitability.