I.B.M. Beats Forecasts With 12 Percent Rise in Net Income
By Anna Johnson on January 22nd, 2009At least one major technology company is doing just fine, thank you, and it’s good ‘ole Big Blue. Indeed, I.B.M. reported $4.4 billion in net income for the fourth quarter of 2008, a 12 percent increase over the same period in 2007.
I.B.M.’s profit growth is said to come from its strategic emphasis on its services and software businesses. These deliver much higher margins than its traditional hardware businesses and now account for over 80 percent of the company’s earnings.
While I.B.M. hardware sales dropped 20 percent in the quarter, these were largely offset by strong performance in its services and software divisions.
And while, overall, revenues were down 6 percent year-on-year for the quarter, this was predominately due to the drop in hardware sales and swings in the relative value of the U.S. dollar. In ‘constant’ dollars, the revenue decline was only 1 percent.
Notably, about 40 percent of Big Blue’s sales and 60 percent of its profits derive from products and services sold on a continuity or subscription basis, such as licenses or contracts that are renewed every year or so.
Hmmm… there’s something in that for all of us…
Source: Steve Lohr, “I.B.M. Tops Forecasts for the Quarter,” The New York Times, January 20, 2009
