IBM beat expectations in its second-quarter 2013 earnings, despite a shortfall of 12 percent in its Systems and Technology revenue.
Excluding a $1 billion “workforce rebalancing” charge, IBM exceeded analyst expectations and reported earnings per share(EPS) of $3.91, which beat analyst expectations of $3.77 per share.
With the restructuring, IBM net income dropped 17 percent, from $3.9 billion in the second quarter of 2012 to $3.2 billion this year. Big Blue also saw total revenues fall for the quarter. Total revenues for the second quarter of 2013 of $24.9 billion were down 3 percent from the second quarter of 2012.
“The workforce restructuring had significant impact on our year-to-year profits,” said Mark Loughridge, IBM senior vice president and chief financial officer, in a call with analysts.
IBM has been under pressure since falling short in revenue and net income in the first quarter, missing its earnings estimates for the first time in eight years. At that time, IBM decided to launch a restructuring effort that would cost the company $1 billion in severance and other expenses related to trimming its workforce. According to the Alliance@IBM, an IBM employee organization, more than 3,000 jobs have been eliminated in this round of layoffs.
“In the second quarter, we delivered strong performance in our higher-value software and mainframe businesses and again significantly increased our services backlog on growth in new business,” said Ginni Rometty, IBM chairman, president and chief executive officer, in a statement.
“Going forward, we will continue investing in our strategic growth initiatives, acquiring and divesting capabilities, re-balancing skills and taking action in the areas that are not performing. We expect continued improvement through the second half of the year and remain confident that we will achieve our increased 2013 operating EPS expectation of at least $16.90, excluding the $1 billion workforce rebalancing charge in the second quarter.”
Loughridge said a substantial second-half gain IBM was expecting in its prior view of earnings per share will not likely be achieved the end of 2013. As a result, the company updated its prior full-year EPS expectations, including the impact of a second-quarter $1 billion workforce rebalancing charge, to at least $16.25, with the net impact of $0.45 driven by the elongated discussions for its larger divestiture project.
Not going into any detail on this divestiture project, Loughridge said IBM has a “very disciplined M&A process” and the company would not under price or rush a divestiture just to close it in 2013.