10-QPeriod: Q1 FY2015

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q1 Ended Mar 31, 2015

Filed April 28, 2015For Securities:IBM

Summary

International Business Machines Corp. (IBM) reported its first-quarter 2015 financial results, showing a revenue of $19.59 billion, a decrease of 11.9% year-over-year, though flat when adjusted for currency and divestitures. Net income was $2.33 billion, down 2.4% from the prior year. The company is actively transforming its business by investing in strategic imperatives like cloud, analytics, social, mobile, and security, which collectively grew over 30% year-over-year on an adjusted basis. This strategic shift, along with continued innovation in its core hardware business (e.g., the new z13 mainframe), is driving a move towards higher-value offerings and leading to margin expansion. IBM's financial performance reflects this strategic pivot, with a focus on higher-margin areas and divesting non-core businesses. Despite overall revenue declines, the company generated strong operating cash flow of $3.6 billion and improved its operating (non-GAAP) earnings per share by 8.6% to $2.91. The company reiterated its full-year 2015 operating earnings guidance and continued its commitment to returning value to shareholders through dividends and share repurchases.

Financial Highlights

51 data points
Beta

Revenue

$19.59B

48.2% Gross Margin

Net Income

$2.33B

11.9% Net Margin

EPS (Diluted)

$2.35

Total Assets

$112.04B

Cash & Equivalents

$8.80B

Free Cash Flow

$2.75B

Financial Statements
Beta
Revenue$19.59B
Cost of Revenue$10.14B
Gross Profit$9.45B
R&D Expenses$1.30B
SG&A Expenses$5.36B
Interest Expense$108.00M
Net Income$2.33B
EPS (Basic)$2.36
EPS (Diluted)$2.35
Shares Outstanding (Basic)988.10M
Shares Outstanding (Diluted)992.30M

Key Highlights

  • 1Total revenue for the first quarter of 2015 was $19.59 billion, a year-over-year decrease of 11.9% as reported, but flat when adjusted for currency and divestitures.
  • 2Net income decreased by 2.4% year-over-year to $2.33 billion.
  • 3Strategic imperatives (cloud, analytics, social, mobile, security) revenue grew over 30% year-over-year on an adjusted basis, indicating a successful business transformation.
  • 4Operating (non-GAAP) earnings per diluted share increased by 8.6% to $2.91, reflecting margin expansion and effective capital allocation.
  • 5The company generated $3.61 billion in cash from operating activities, demonstrating strong operational cash flow.
  • 6IBM repurchased 7.7 million shares of common stock during the quarter as part of its ongoing commitment to returning capital to shareholders.

Frequently Asked Questions

IBM reported a decrease in total revenue, down 11.9% year-over-year as reported, but indicated this was flat when adjusted for currency and divestitures. Net income also saw a slight decline. However, the company highlighted strong growth in its strategic imperatives and an increase in operating (non-GAAP) earnings per share, suggesting a positive underlying operational shift towards higher-value offerings.

IBM is actively managing its portfolio by divesting non-strategic businesses and reinvesting in 'strategic imperatives' such as cloud, data analytics, and mobile solutions, which are experiencing significant growth. The company is also focusing on innovation within its core hardware segment, exemplified by the new z13 mainframe, to drive value and maintain competitiveness.

The strategic imperatives represent IBM's focus on high-growth, high-value areas of the IT market. Their robust growth (over 30% adjusted year-over-year) indicates a successful transition towards future revenue streams and profitability, underscoring the company's strategy to adapt to evolving market demands and technological advancements.

IBM generated strong operating cash flow of $3.61 billion in Q1 2015. The company continued its practice of returning capital to shareholders through dividends and significant share repurchases, repurchasing 7.7 million shares during the quarter. This demonstrates a commitment to enhancing shareholder value alongside its strategic transformation.