IBM (NYSE: IBM) today announced first-quarter 2007 diluted
earnings of $1.21 per share from continuing operations, an increase of
12 percent as reported, compared with diluted earnings of $1.08 per
share in the first quarter of 2006. First-quarter income from
continuing operations was $1.8 billion compared with $1.7 billion in
the first quarter of 2006, an increase of 8 percent. Total revenues
for the first quarter of 2007 of $22.0 billion increased 7 percent (4
percent, adjusting for currency) from the first quarter of 2006.
"IBM's good results in the quarter demonstrate the breadth of our
global capabilities, the advantages of our business model and our
focus on profitable growth," said Samuel J. Palmisano, IBM chairman,
president and chief executive officer. "We continued to grow in the
higher-value products and services that help our clients transform
their businesses. We again grew gross profit margins and earnings, and
continued to generate significant cash from operations. This gives us
considerable financial capability to strengthen our position in the
profitable growth segments and create further value for our
investors."
From a geographic perspective, the Americas first-quarter revenues
were $9.1 billion, an increase of 1 percent as reported (1 percent,
adjusting for currency) from the 2006 period. Revenues from
Europe/Middle East/Africa were $7.6 billion, up 13 percent (5 percent,
adjusting for currency). Asia-Pacific revenues increased 10 percent (9
percent, adjusting for currency) to $4.5 billion. OEM revenues were
$828 million, down 5 percent compared with the 2006 first quarter.
Total Global Services revenues grew 8 percent (4 percent,
adjusting for currency). Segment revenues from Global Business
Services increased 9 percent (6 percent, adjusting for currency) to
$4.2 billion, and segment revenues from Global Technology Services
increased 7 percent (4 percent, adjusting for currency) to $8.3
billion. IBM signed services contracts totaling $11.1 billion, down 2
percent year over year, and ended the first quarter with an estimated
services backlog, including Strategic Outsourcing, Business
Transformation Outsourcing, Global Business Services, Integrated
Technology Services and Maintenance, of $115 billion.
Revenues from the Systems and Technology (S&T) segment totaled
$4.5 billion for the quarter, up 2 percent (flat, adjusting for
currency). S&T revenues from System z server products increased 12
percent compared with the year-ago period. Total delivery of System z
computing power, which is measured in MIPS (millions of instructions
per second), increased 9 percent. Revenues from the System p UNIX
server products increased 14 percent compared with the 2006 period.
Revenues from the System x servers increased 7 percent, and revenues
from the System i servers decreased 13 percent. Revenues from
Microelectronics decreased 7 percent and revenues from System Storage
decreased 1 percent.
Revenues from the Software segment were $4.3 billion, an increase
of 9 percent (5 percent, adjusting for currency) compared with the
first quarter of 2006. Revenues from IBM's middleware products, which
primarily include WebSphere, Information Management, Tivoli, Lotus and
Rational products, were $3.2 billion, up 10 percent versus the first
quarter of 2006. Operating systems revenues of $522 million were flat
compared with the prior-year quarter. Revenues from other software and
services increased, which includes the Product Lifecycle Management
portfolio of products.
For the WebSphere family of software products, which facilitate
customers' ability to manage a wide variety of business processes
using open standards to interconnect applications, data and operating
systems, revenues increased 14 percent. Revenues for Information
Management software, which enables clients to leverage information on
demand, increased 20 percent. Revenues from Tivoli software,
infrastructure software that enables customers to centrally manage
networks including security and storage capability, increased 18
percent, and revenues for Lotus software, which allows collaborating
and messaging by customers in real-time communication and knowledge
management, increased 7 percent year over year. Revenues from Rational
software, integrated tools to improve the processes of software
development, increased 15 percent compared with the year-ago quarter.
Global Financing segment revenues increased 6 percent (3 percent,
adjusting for currency) in the first quarter to $614 million.
The company's total gross profit margin was 40.2 percent in the
2007 first quarter compared with 39.1 percent in the 2006 period --
the 11th consecutive quarter of year-to-year increase.
Total expense and other income increased 11 percent to $6.3
billion compared with the prior-year period. SG&A expense increased 11
percent to $5.1 billion. RD&E expense increased 4 percent compared
with the year-ago period. Intellectual property and custom development
income decreased to $205 million compared with $229 million a year
ago. Other (income) and expense contributed income of $180 million in
the first quarter of 2007 versus income of $246 million in the first
quarter of 2006.
IBM's effective tax rate in the first-quarter 2007 was 28.5
percent compared with 30.0 percent in the first quarter of 2006.
Shares repurchased totaled approximately $3.5 billion in the first
quarter. The weighted-average number of diluted common shares
outstanding in the first-quarter 2007 was 1.52 billion compared with
1.59 billion shares in the same period of 2006. As of March 31, 2007,
there were 1.48 billion basic common shares outstanding.
Debt, including Global Financing, totaled $23.9 billion, compared
with $22.7 billion at year-end 2006. From a management segment view,
the non-global financing debt-to-capitalization ratio was 2.8 percent
at the end of March 31, 2007, and Global Financing debt increased $1.0
billion from year-end 2006 to a total of $23.2 billion, resulting in a
debt-to-equity ratio of 6.9 to 1.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained
herein, statements contained in this release may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements involve a
number of risks, uncertainties and other factors that could cause
actual results to differ materially, including the company's failure
to continue to develop and market new and innovative products and
services and to keep pace with technological change; competitive
pressures; failure to obtain or protect intellectual property rights;
quarterly fluctuations in revenues and volatility of stock prices; the
company's ability to attract and retain key personnel; adverse affects
from tax matters; currency fluctuations and customer financing risks;
customer credit risk on trade receivables; the company's failure to
maintain the adequacy of its internal controls; the company's use of
certain estimates and assumptions; dependence on certain suppliers;
changes in the financial or business condition of the company's
distributors or resellers; the company's ability to successfully
manage acquisitions and alliances; failure to have sufficient
insurance; legal, political, health and economic conditions; risk
factors related to IBM securities; and other risks, uncertainties and
factors discussed in the company's Form 10-Q, Form 10-K and in the
company's other filings with the U.S. Securities and Exchange
Commission (SEC) or in materials incorporated therein by reference.
The company assumes no obligation to update or revise any forward-
looking statements.
Presentation of Information in this Press Release
In an effort to provide investors with additional information
regarding the company's results as determined by generally accepted
accounting principles (GAAP), the company has also disclosed in this
press release the following non-GAAP information which management
believes provides useful information to investors:
IBM Results --
-- adjusting for currency (i.e., at constant currency).
The rationale for management's use of non-GAAP measures is
included as part of the supplementary materials presented within the
first-quarter earnings materials. These materials are available on the
IBM investor relations Web site at www.ibm.com/investor and are being
included in Attachment II ("Non- GAAP Supplementary Materials") to the
Form 8-K that includes this press release and is being submitted today
to the SEC.
Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to
begin at 4:30 p.m. EDT, today. Investors may participate by viewing
the Webcast at www.ibm.com/investor/1q07. Presentation charts will be
available on the Web site prior to the Webcast.
Financial Results Attached (amounts may not total due to rounding)
-0-
*T
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three Months Ended March 31,
Percent
2007 2006 Change
------- ------- -------
REVENUE
Global Technology Services $8,258 $7,719 7.0%
Gross profit margin 29.2% 29.2%
Global Business Services 4,183 3,848 8.7%
Gross profit margin 23.8% 21.4%
Systems and Technology 4,520 4,419 2.3%
Gross profit margin 34.8% 32.0%
Software 4,251 3,907 8.8%
Gross profit margin 83.6% 84.2%
Global Financing 614 582 5.6%
Gross profit margin 50.9% 52.8%
Other 203 184 10.1%
Gross profit margin 12.0% 1.2%
TOTAL REVENUE 22,029 20,659 6.6%
GROSS PROFIT 8,866 8,088 9.6%
Gross profit margin 40.2% 39.1%
EXPENSE AND OTHER INCOME
S,G&A 5,089 4,602 10.6%
Expense to revenue 23.1% 22.3%
R,D&E 1,509 1,456 3.7%
Expense to revenue 6.9% 7.0%
Intellectual property
and custom development
income (205) (229) -10.6%
Other (income) and expense (180) (246) -27.0%
Interest expense 73 66 9.7%
TOTAL EXPENSE AND
OTHER INCOME 6,287 5,648 11.3%
Expense to revenue 28.5% 27.3%
INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES 2,579 2,440 5.7%
Pre-tax margin 11.7% 11.8%
Provision for
income taxes 735 732 0.4%
Effective tax rate 28.5% 30.0%
INCOME FROM CONTINUING
OPERATIONS 1,844 1,708 8.0%
Net margin 8.4% 8.3%
DISCONTINUED OPERATIONS
Loss from discontinued
operations 0 0
NET INCOME $1,844 $1,708 8.0%
====== ======
EARNINGS/(LOSS)PER SHARE
OF COMMON STOCK:
ASSUMING DILUTION
CONTINUING
OPERATIONS $1.21 $1.08 12.0%
DISCONTINUED
OPERATIONS 0.00 0.00
------ ------
TOTAL $1.21 $1.08 12.0%
====== ======
BASIC
CONTINUING
OPERATIONS $1.23 $1.09 12.8%
DISCONTINUED
OPERATIONS 0.00 0.00
------ ------
TOTAL $1.23 $1.09 12.8%
====== ======
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING (M's)
ASSUMING DILUTION 1,522.8 1,587.2
BASIC 1,499.5 1,564.5
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited)
At At
(Dollars in millions) March 31 December 31 Percent
2007 2006 Change
--------- ----------- -------
ASSETS
Cash, cash equivalents,
and marketable securities $10,781 $10,657 1.2%
Receivables - net, inventories,
prepaid expenses 31,665 34,003 -6.9%
Plant, rental machines,
and other property - net 14,414 14,440 -0.2%
Investments and other assets 44,760 44,134 1.4%
-------- --------
TOTAL ASSETS $101,619 $103,234 -1.6%
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $9,661 $8,902 8.5%
Long-term debt 14,285 13,780 3.7%
-------- --------
Total debt 23,946 22,682 5.6%
Accounts payable, taxes,
and accruals 27,102 31,189 -13.1%
Other liabilities 22,763 20,857 9.1%
-------- --------
TOTAL LIABILITIES 73,811 74,728 -1.2%
STOCKHOLDERS' EQUITY 27,809 28,506 -2.4%
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $101,619 $103,234 -1.6%
======== ========
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
(Dollars in millions)
FIRST QUARTER 2007
----------------------------------------------
Pre-tax
Income
(Loss)
From
--------- Revenue -------- Continuing Pre-tax
External Internal Total Operations Margin
----------------------------------------------
Global Technology
Services $8,258 $425 $8,683 $681 7.8%
Y-T-Y Change 7.0% -5.8% 6.3% -19.3%
Global Business
Services 4,183 301 4,485 470 10.5%
Y-T-Y Change 8.7% -10.4% 7.2% 32.1%
Systems and
Technology 4,520 267 4,787 96 2.0%
Y-T-Y Change 2.3% -4.6% 1.9% nm
Software 4,251 585 4,836 1,036 21.4%
Y-T-Y Change 8.8% 13.8% 9.4% 1.5%
Global Financing 614 349 963 374 38.8%
Y-T-Y Change 5.6% -4.3% 1.8% -9.7%
Total Reportable
Segments 21,826 1,927 23,753 2,657 11.2%
Y-T-Y Change 6.6% -1.0% 5.9% 1.5%
Eliminations /
Other 203 (1,927) (1,724) (78)
Total IBM
Consolidated $22,029 $0 $22,029 $2,579 11.7%
Y-T-Y Change 6.6% 6.6% 5.7%
nm - not meaningful
(Dollars in millions)
FIRST QUARTER 2006
----------------------------------------------
Pre-tax
Income
(Loss)
From
--------- Revenue -------- Continuing Pre-tax
External Internal Total Operations Margin
----------------------------------------------
Global Technology
Services $7,719 $451 $8,171 $844 10.3%
Global Business
Services 3,848 336 4,184 356 8.5%
Systems and
Technology 4,419 280 4,699 (18) -0.4%
Software 3,907 514 4,421 1,021 23.1%
Global Financing 582 364 946 414 43.8%
Total Reportable
Segments 20,475 1,946 22,421 2,616 11.7%
Eliminations /
Other 184 (1,946) (1,762) (177)
Total IBM
Consolidated $20,659 $0 $20,659 $2,440 11.8%
*T
