IBM experienced a rise in net income of 9 percent driven largely by systems, software and sales in growth markets. Sales of System z mainframes were up nearly 70 percent in the quarter.
IBM saw fourth-quarter profits rise 9
percent on the strength of systems, software and growth markets.
Announcing its fourth-quarter 2010 earnings on Jan. 18, IBM
said fourth-quarter net income was $5.3 billion, compared with $4.8 billion in
the fourth quarter of 2009, an increase of 9 percent. Total revenues for the
fourth quarter of 2010-of $29.0 billion-increased 7 percent from the fourth
quarter of 2009.
"We completed an outstanding year, with record profit and free cash
flow, and exceeded the high end of our 2010 earnings per share roadmap
objective," said Samuel J. Palmisano, IBM
chairman, president and chief executive officer, in a statement. "We also
capped a decade in which our shift to high-value businesses, our global
integration of IBM, our investment in
research and development of almost $60 billion and our acquisition of 116
companies have helped us to nearly triple our EPS and return more than $100
billion to shareholders.
"As IBM enters its second century,
we will continue to focus on our long-term strategic initiatives-growth
markets, Smarter Planet Solutions, cloud and business analytics-as we drive to
achieve our new roadmap target of operating earnings per share of at least $20
During a call with analysts to discuss IBM's
earnings, Mark Loughridge, senior vice president and chief financial officer of
Finance and Enterprise Transformation at IBM, said, "Systems
and Technology had fantastic performance, with 21 percent growth. We had growth
in every platform, but the most impressive growth was in our System z
mainframes, which were up almost 70 percent."
Revenues from the Systems and Technology segment totaled $6.3 billion for
Loughridge added that "Systems and Technology was up 22 percent at
constant currency, with growth in every platform, and particularly strong
performance in our System z mainframe. Our software revenue was up 12 percent
at constant currency without the divested PLM [Product Lifecycle Management]
Moreover, from a geographic perspective IBM's
major market revenue growth was 5 percent at constant currency, led by the United
Loughridge said. Yet, "Our growth markets revenue was up 13 percent at
constant currency. Business analytics, another of our key growth initiatives,
was up 19 percent."
For his part, Loughridge said for the full year of 2010, the growth markets
were up 11 percent and outpaced the major markets by 10 points, faster than the
company saw in both 2008 and 2009. "The combined revenue in the BRICs [Brazil,
and China] was
up 17 percent, with growth in each of the four countries, and particularly
strong growth in China,
which was up 25 percent, and Russia,
up 46 percent," Loughridge said. "Our growth markets performance was
broad-based; with double-digit growth in 50 growth market countries, up from 32
"IBM has leveraged its large scale
and its established global brand to drive growth in emerging markets,"
said Greg Richardson, an analyst with Technology Business Research. "While
other companies put their emerging market strategies in the backseat during the
economic downturn of 2008 and 2009, IBM was
steadfast in its investments in growth markets."
In the software arena, IBM saw strong
performance in its key middleware brands, Loughridge said. WebSphere was up 32
percent year to year; Tivoli was up
12 percent, Rational was up 10 percent, and Information Management was up 10
percent. Lotus revenues decreased 3 percent. Overall, revenues from IBM's
key middleware products were $4.7 billion.
"And we continue to add to IBM's
capabilities," Loughridge said on the call with analysts. "With the
acquisition of Netezza, we can extend the value of business analytics to both
large enterprises and smaller clients, with a system that's simple, economical
and offers quick time-to-value. Netezza is a leading provider of
high-performance analytics appliances that can be up and running in a matter of
hours, handling complex analytical queries 10 to 100 times faster than
traditional systems. It helps clients gain faster insights into their business
information, with increased performance at a lower cost. Netezza got off to a
strong start this quarter, and complements IBM's
Business Analytics and Optimization capabilities."
Also on the analytics side of things, IBM's
Global Business Services unit saw its business analytics revenue rise over 40
percent. "We've now added over 4,000 consultants in 2010, and now have
over 7,800 dedicated consultants in our business analytics practice,"
Revenues from the company's business analytics operations across services
and software segments increased 19 percent, IBM
"IBM is pulling together a diverse
set of capabilities-like only IBM can-to put
behind its Analytics strategy," TBR's Richardson said. "IBM
is utilizing its Analytics capabilities in software and services to better position
its systems offerings, including in cloud infrastructure." In addition, he
said, "TBR expects IBM to utilize
Analytics as a means to extend its reach from IT departments to line-of-business
On a year-to-year basis, overall net income for the year ended Dec. 31, 2010, was $14.8
billion, compared with $13.4 billion in the year-ago period, an increase of 10
summary of IBM's fourth-quarter 2010
results, Richardson added: "IBM
is leaning on its Smarter Planet and Analytics strategies to generate demand
for IT infrastructure as tools to manage social needs, such as energy, banking
and rail, in high-growth cities. As a result of past efforts and a
forward-looking strategy, IBM is developing
a 'play book' of best practices for developing Smarter Cities in Growth
Markets. Currently, IBM is leveraging this
strategy in 250 cities worldwide, and is targeting penetration of 500 cities by
2015. By expanding its presence in the core infrastructure of developing cities
and regions, TBR believes IBM is aiming to
gain a toehold in the regions by becoming an established, household name."
Darryl K. Taft covers the development tools and developer-related issues beat from his office in Baltimore. He has more than 10 years of experience in the business and is always looking for the next scoop. Taft is a member of the Association for Computing Machinery (ACM) and was named 'one of the most active middleware reporters in the world' by The Middleware Co. He also has his own card in the 'Who's Who in Enterprise Java' deck.