10-QPeriod: Q2 FY2010

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q2 Ended Jun 30, 2010

Filed July 27, 2010For Securities:IBM

Summary

International Business Machines Corporation (IBM) reported its second quarter and first half 2010 financial results. For the second quarter, total revenue increased by 2.0% to $23.7 billion, with net income rising 9.1% to $3.4 billion, translating to diluted earnings per share of $2.61, a 12.5% increase year-over-year. For the first six months, revenue grew 3.6% to $46.6 billion, and net income increased 10.9% to $6.0 billion, with diluted earnings per share reaching $4.57, up 13.7% compared to the prior year. The company demonstrated improved revenue growth, particularly in its growth markets and key software areas like business analytics and middleware. Despite a strengthening U.S. dollar impacting reported figures, IBM managed to expand its gross profit margin and net income margin, showcasing effective cost management and operational leverage. Acquisitions in the Software segment contributed to growth, further enhancing IBM's portfolio. The company also reiterated its positive full-year 2010 earnings per share outlook, expecting at least $11.25.

Financial Highlights

48 data points
Beta

Revenue

$23.72B

45.6% Gross Margin

Net Income

$3.39B

14.3% Net Margin

EPS (Diluted)

$2.61

Total Assets

$103.42B

Cash & Equivalents

$10.32B

Free Cash Flow

$2.94B

Financial Statements
Beta
Revenue$23.72B
Cost of Revenue$12.91B
Gross Profit$10.81B
R&D Expenses$1.48B
SG&A Expenses$5.06B
Interest Expense$90.00M
Net Income$3.39B
EPS (Basic)$2.65
EPS (Diluted)$2.61
Shares Outstanding (Basic)1.28B
Shares Outstanding (Diluted)1.30B

Key Highlights

  • 1Total revenue for Q2 2010 increased 2.0% year-over-year to $23.7 billion, with a 1.6% increase adjusted for currency.
  • 2Net income for Q2 2010 rose 9.1% to $3.4 billion, leading to diluted EPS of $2.61, a 12.5% increase compared to Q2 2009.
  • 3For the first six months of 2010, revenue grew 3.6% to $46.6 billion, and net income increased 10.9% to $6.0 billion.
  • 4Growth markets revenue increased significantly by 13.7% (9% adjusted for currency) in Q2, driven by BRIC countries.
  • 5Software segment revenue showed strong performance, with key branded middleware up 9.4% (10% adjusted for currency) in Q2.
  • 6The company repurchased approximately 32.4 million shares of common stock in Q2 2010, contributing to EPS growth.
  • 7IBM reiterated its full-year 2010 earnings per share outlook, expecting at least $11.25 per diluted share.

Frequently Asked Questions

In the second quarter of 2010, IBM reported total revenue of $23.7 billion, a 2.0% increase year-over-year. Net income grew by 9.1% to $3.4 billion, resulting in diluted earnings per share (EPS) of $2.61, a 12.5% increase from the prior year. The company also saw improvements in its net income margin, which rose to 14.3%.

IBM's segments showed varied performance. Global Technology Services revenue grew slightly, while Global Business Services saw improved revenue growth. The Software segment was a strong performer, with key branded middleware up 9.4% in Q2, driven by areas like business analytics. Systems and Technology revenue increased, though System z saw a decline as expected due to the product cycle. Global Financing revenue declined, but its gross profit margin improved.

IBM raised its full-year 2010 earnings per share outlook to at least $11.25 per diluted share. The company expects continued revenue growth and margin expansion, supported by investments in growth areas, strategic acquisitions, and ongoing productivity initiatives. The company anticipates positive performance trends to continue into the second half of the year.

During the first half of 2010, IBM completed six acquisitions, including Lombardi Software, Intelliden, Initiate Systems, and Cast Iron Systems, primarily within the Software segment. The company also divested its Product Lifecycle Management (PLM) software activities in the first quarter of 2010, which resulted in a gain.