10-QPeriod: Q2 FY2012

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 31, 2012For Securities:IBM

Summary

International Business Machines Corporation (IBM) reported its financial results for the quarter and six months ended June 30, 2012. The company experienced a slight decrease in revenue on a reported basis, but saw growth when adjusted for currency, indicating underlying business resilience. Profitability improved with expanded gross, pre-tax, and net income margins, alongside double-digit growth in diluted earnings per share, both on a reported and operating (non-GAAP) basis. IBM's financial performance reflects the strength of its diversified business model, with growth initiatives like cloud computing, business analytics, and Smarter Planet solutions showing positive traction. The company generated significant cash from operations, enabling substantial returns to shareholders through stock repurchases and dividends. Management raised its full-year earnings per share expectations, signaling confidence in continued performance.

Financial Highlights

50 data points
Beta

Revenue

$25.78B

47.6% Gross Margin

Net Income

$3.88B

15.1% Net Margin

EPS (Diluted)

$3.34

Total Assets

$113.83B

Cash & Equivalents

$10.86B

Free Cash Flow

$3.24B

Financial Statements
Beta
Revenue$25.78B
Cost of Revenue$13.50B
Gross Profit$12.28B
R&D Expenses$1.59B
SG&A Expenses$5.84B
Interest Expense$117.00M
Net Income$3.88B
EPS (Basic)$3.38
EPS (Diluted)$3.34
Shares Outstanding (Basic)1.15B
Shares Outstanding (Diluted)1.16B

Key Highlights

  • 1Total revenue for the second quarter of 2012 was $25.78 billion, a 3.3% decrease year-over-year, but increased 0.5% when adjusted for currency.
  • 2Net income increased by 5.9% to $3.88 billion for the second quarter, with diluted earnings per share rising 11.3% to $3.34.
  • 3Operating (non-GAAP) diluted earnings per share increased by 13.6% to $3.51.
  • 4The Software segment revenue was flat year-over-year on a reported basis but increased 4% adjusted for currency, with key middleware showing strength.
  • 5Global Technology Services and Global Business Services (collectively Global Services) revenue saw modest constant currency growth, with profit margins expanding.
  • 6The company generated $8.73 billion in cash from operating activities for the first six months of 2012, an increase of $655 million year-over-year.
  • 7IBM raised its full-year 2012 diluted earnings per share expectations, signaling continued confidence in its financial outlook.

Frequently Asked Questions

IBM reported total revenue of $25.78 billion for the second quarter ended June 30, 2012. This represents a 3.3% decrease compared to the same period in 2011. However, when adjusted for currency fluctuations, revenue increased by 0.5% year-over-year, indicating underlying operational stability.

Profitability improved significantly. Net income for the second quarter rose 5.9% to $3.88 billion, with diluted earnings per share increasing 11.3% to $3.34. On a non-GAAP operating basis, diluted earnings per share saw an even stronger increase of 13.6% to $3.51. Gross profit margin expanded by 1.2 percentage points to 47.6%.

IBM raised its full-year 2012 earnings per share expectations. The company now anticipates GAAP diluted earnings per share of at least $14.40 and operating (non-GAAP) diluted earnings per share of at least $15.10. This revised outlook reflects confidence in the company's business model and continued performance, particularly from growth initiatives and productivity gains.

IBM generated strong cash flow from operations, totaling $8.73 billion for the first six months of 2012. This robust cash generation allowed the company to invest in growth initiatives and return value to shareholders through significant common stock repurchases and dividends. In the second quarter alone, IBM returned $4.0 billion to shareholders through these methods.