IBM Sees Revenues Dip, Profit Drops 1%

By Darryl K. Taft  |  Posted 2009-04-20 Print this article Print

Technology sector bellwether IBM sees a 1 percent loss in revenues for the first quarter of 2009 compared with the same period a year ago. But bright spots for the company are WebSphere and Rational, which increased revenues 5 percent and 9 percent, respectively.

Technology sector bellwether IBM saw a 1 percent loss in revenues for its first quarter of 2009, compared with the same period a year ago.

IBM, which has been mired in a layoff spiral, announced its first-quarter earnings on April 20, reporting net income of $2.3 billion compared with $2.32 billion in the first quarter of 2008, a decrease of 1 percent. Total revenues for the first quarter of 2009 of $21.7 billion decreased 11 percent from the first quarter of 2008.

"IBM continued to perform well in a very difficult economic environment," Samuel Palmisano, IBM chairman, president and CEO, said in a statement. "This was due to our long-term strategic focus: shifting into software and services, divesting of commodity businesses, and creating solutions that help clients reduce cost and conserve capital. At the same time we have a disciplined approach to cost and expense management giving us a strong financial position."

From a geographic perspective, IBM's first-quarter revenues in the Americas were $9.3 billion, down 7 percent from the 2008 period. Revenues from Europe/Middle East/Africa region were $7.2 billion, down 18 percent, and Asia-Pacific revenues decreased 6 percent to $4.8 billion. In addition, revenues from the company's growth markets organization decreased 12 percent, representing 17 percent of geographic revenues.

During a conference call detailing the company's earning's, Mark Loughridge, IBM senior vice president and chief financial officer, said IBM's services organization had 16 services deals greater than $100 million. However, total IBM Global Services revenues decreased 10 percent, Loughridge said. Global Technology Services segment revenues decreased 10 percent to $8.8 billion and Global Business Services segment revenues decreased 10 percent to $4.4 billion.

Meanwhile, revenues from IBM's Software segment were $4.5 billion, a decrease of 6 percent compared with the first quarter of 2008, and revenues from IBM's middleware products, primarily WebSphere, Information Management, Tivoli, Lotus and Rational products, were $3.6 billion, a decrease of 5 percent. But for the WebSphere family of products alone, revenues increased 5 percent year over year, while revenues from Rational software, IBM's integrated tools to improve the processes of software development, increased 9 percent.

Moreover, Loughridge said as IBM adjusts following its drop in first-quarter results the company will be making a "transition toward higher-value software and services." This will include moves such as IBM's Smarter Planet initiative, business analytics and new computing models such as cloud computing. Loughridge also said he expects more positive results from IBM's Cognos and Ilog product lines, which performed well in the first quarter.

"Information management is a key component of our new IBM Business Analytics and Optimization Services," Loughridge said, speaking of the new consulting practice IBM announced on April 14. 

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.

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