10-QPeriod: Q1 FY2010

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q1 Ended Mar 31, 2010

Filed April 27, 2010For Securities:IBM

Summary

International Business Machines Corporation (IBM) reported its first-quarter 2010 financial results, showcasing a 5.3% increase in total revenue to $22.9 billion, though revenue was flat when adjusted for currency fluctuations. Net income saw a healthy 13.3% rise to $2.6 billion, leading to diluted earnings per share of $1.97, up 15.9% from the prior year. The company demonstrated strong operational performance with improved gross profit margins and effective expense management, contributing to an 0.8 percentage point increase in net income margin to 11.4%. The company continued its strategic transformation by investing in higher-value areas, completing five acquisitions totaling $996 million, primarily in the software segment, aimed at enhancing its product offerings. Concurrently, IBM divested its Product Lifecycle Management (PLM) software activities to Dassault Systemes, recognizing a substantial pre-tax gain of $591 million from the transaction. This strategic shift highlights IBM's focus on optimizing its business portfolio for long-term growth and profitability.

Financial Highlights

48 data points
Beta

Revenue

$22.86B

43.6% Gross Margin

Net Income

$2.60B

11.4% Net Margin

EPS (Diluted)

$1.97

Total Assets

$105.21B

Cash & Equivalents

$12.47B

Free Cash Flow

$3.68B

Financial Statements
Beta
Revenue$22.86B
Cost of Revenue$12.88B
Gross Profit$9.98B
R&D Expenses$1.51B
SG&A Expenses$5.68B
Interest Expense$82.00M
Net Income$2.60B
EPS (Basic)$2.00
EPS (Diluted)$1.97
Shares Outstanding (Basic)1.30B
Shares Outstanding (Diluted)1.32B

Key Highlights

  • 1Total revenue increased by 5.3% to $22.9 billion, driven by strong performance in Software and growth markets.
  • 2Net income grew by 13.3% to $2.6 billion, resulting in a 15.9% increase in diluted Earnings Per Share (EPS) to $1.97.
  • 3Gross profit margin improved by 0.2 percentage points to 43.6%, reflecting a favorable business mix and cost management.
  • 4IBM completed five strategic acquisitions, investing $996 million to bolster its capabilities, particularly in the Software segment.
  • 5The company divested its PLM software activities, recognizing a significant pre-tax gain of $591 million.
  • 6Global Services signings decreased by 2.1% to $12.3 billion, but the estimated backlog remained robust at $134 billion.
  • 7The company reiterated its full-year 2010 EPS guidance, increasing it to at least $11.20 per diluted share.

Frequently Asked Questions

IBM reported a 5.3% increase in total revenue to $22.9 billion for the first quarter of 2010 compared to the same period in 2009. However, when adjusted for currency fluctuations, the revenue growth was flat, indicating that foreign exchange rates had a neutral impact on the reported revenue increase.

Net income increased by a healthy 13.3% to $2.6 billion. Diluted earnings per share (EPS) also saw significant growth, rising by 15.9% to $1.97 compared to $1.70 in the prior year's first quarter. This increase was driven by revenue growth, improved gross margins, expense productivity, and the benefits of stock repurchases.

IBM focused on its strategic transformation by completing five acquisitions, totaling $996 million, primarily to enhance its Software and Global Technology Services capabilities. Concurrently, the company divested its Product Lifecycle Management (PLM) software business, recognizing a $591 million pre-tax gain. These actions reflect IBM's strategy to shift towards higher-value offerings and optimize its business portfolio.

The Software segment showed strong revenue growth of 10.6% (5% adjusted for currency), driven by key middleware brands like WebSphere and Information Management. Global Services revenue increased by 4.3% (down 2% adjusted for currency), with a substantial backlog of $134 billion. Systems and Technology revenue grew 4.9% (2% adjusted for currency), aided by strong performance in System x and Storage, though System z and Power Systems saw declines.