10-QPeriod: Q1 FY2013

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q1 Ended Mar 31, 2013

Filed April 30, 2013For Securities:IBM

Summary

IBM reported total revenue of $23.4 billion for the first quarter of 2013, a decrease of 5.1% (3.2% adjusted for currency) compared to the prior year. Despite the revenue decline, the company saw an expansion in gross and net income margins, resulting in a slight decrease in net income to $3.03 billion from $3.07 billion in the prior year. Diluted earnings per share (EPS) were $2.70, an increase of 3.4% from the prior year, and operating (non-GAAP) diluted EPS grew by 7.9% to $3.00, indicating strong operational performance excluding certain charges. The company generated $4.0 billion in cash from operations, though this was a decrease from the prior year due to a decline in the accounts receivable clearance rate and higher tax payments. IBM returned $3.5 billion to shareholders through stock repurchases and dividends. Management highlighted sales execution challenges in the Software and System z mainframe businesses that caused some profitable transactions to not close in the quarter, impacting overall results but positioning the company for a strong start in the second quarter. The company reaffirmed its full-year 2013 GAAP EPS guidance of at least $15.53 and operating (non-GAAP) EPS guidance of at least $16.70.

Financial Highlights

50 data points
Beta

Revenue

$23.41B

45.6% Gross Margin

Net Income

$3.03B

13.0% Net Margin

EPS (Diluted)

$2.70

Total Assets

$117.26B

Cash & Equivalents

$10.59B

Free Cash Flow

$3.31B

Financial Statements
Beta
Revenue$23.41B
Cost of Revenue$12.73B
Gross Profit$10.68B
R&D Expenses$1.64B
SG&A Expenses$5.58B
Interest Expense$94.00M
Net Income$3.03B
EPS (Basic)$2.72
EPS (Diluted)$2.70
Shares Outstanding (Basic)1.11B
Shares Outstanding (Diluted)1.12B

Key Highlights

  • 1Total revenue for Q1 2013 was $23.4 billion, down 5.1% year-over-year (3.2% adjusted for currency).
  • 2Net income decreased slightly to $3.03 billion, down 1.1% from $3.07 billion in Q1 2012.
  • 3Diluted EPS increased by 3.4% to $2.70, and operating (non-GAAP) diluted EPS grew by 7.9% to $3.00.
  • 4Cash flow from operations was $4.0 billion, a decrease from the prior year primarily due to lower receivables clearance and higher tax payments.
  • 5The company returned $3.5 billion to shareholders via stock repurchases and dividends.
  • 6Sales execution challenges in Software and System z caused some transactions to roll over into Q2, impacting Q1 results but providing a positive outlook for Q2.
  • 7The company reaffirmed its full-year 2013 GAAP EPS guidance of at least $15.53 and operating (non-GAAP) EPS guidance of at least $16.70.

Frequently Asked Questions

IBM reported total revenue of $23.4 billion, a 5.1% decrease year-over-year (3.2% adjusted for currency). Net income was $3.03 billion, a slight decrease of 1.1% from the prior year. Diluted earnings per share (EPS) were $2.70, up 3.4% year-over-year. Operating (non-GAAP) diluted EPS increased by 7.9% to $3.00, reflecting strong operational performance.

Revenue was impacted by a 5.1% year-over-year decline, partly due to sales execution challenges in the Software and System z mainframe businesses where some large transactions did not close. However, IBM benefited from expanded gross and net income margins, and a lower effective tax rate, which helped offset the revenue decline and supported EPS growth. Cash flow from operations decreased due to a lower accounts receivable clearance rate and higher tax payments.

In the first quarter of 2013, IBM returned $3.5 billion to shareholders through gross common stock repurchases ($2.6 billion) and dividends ($0.9 billion). The company also reaffirmed its full-year 2013 earnings per share guidance.

IBM reaffirmed its full-year 2013 GAAP EPS guidance of at least $15.53 and operating (non-GAAP) EPS guidance of at least $16.70. The company anticipates taking most of its workforce rebalancing actions in the second quarter, expecting a pre-tax charge of approximately $1 billion. It expects improved sales execution to drive stronger performance in the second half of the year.