Armonk, N.Y. – 18 Jul 2012:
- Diluted EPS:
– GAAP: $3.34,
up 11 percent;
– Operating
(non-GAAP): $3.51, up 14 percent;
- Net income:
– GAAP: $3.9
billion, up 6 percent;
– Operating
(non-GAAP): $4.1 billion, up 8 percent;
- Gross profit margin:
– GAAP: 47.6
percent, up 1.2 points;
– Operating
(non-GAAP): 48.2 percent, up 1.5 points;
- Revenue: $25.8 billion, down 3
percent, up 1 percent adjusting for currency; - Free cash flow of $3.7 billion, up
9 percent; - Software revenue, flat, up 4
percent adjusting for currency; - Services revenue down 3 percent,
up 1 percent adjusting for currency:
– Services
pre-tax income up 18 percent;
- Services backlog of $136 billion,
down 6 percent, flat adjusting for currency;
- Systems and Technology revenue
down 9 percent, down 7 percent adjusting for
currency; - Growth markets revenue up 2
percent, up 8 percent adjusting for currency; - Business analytics revenue up 13
percent in the first half; - Smarter Planet revenue up more
than 20 percent in the first half; - Cloud revenue doubled first-half
2011 revenue; - Full-year 2012 operating
(non-GAAP) EPS expectations raised to at least $15.10 from at least
$15.00.
IBM (NYSE: IBM) today announced
second-quarter 2012 diluted earnings of $3.34 per share, compared
with diluted earnings of $3.00 per share in the second quarter of
2011, an increase of 11 percent. Operating (non-GAAP) diluted
earnings were $3.51 per share, compared with operating diluted
earnings of $3.09 per share in the second quarter of 2011, an
increase of 14 percent.
Second-quarter net income was $3.9 billion compared with $3.7
billion in the second quarter of 2011, an increase of 6
percent. Operating (non-GAAP) net income was $4.1 billion
compared with $3.8 billion in the second quarter of 2011, an
increase of 8 percent.
Total revenues for the second quarter of 2012 of $25.8 billion
were down 3 percent (up 1 percent, adjusting for currency) from the
second quarter of 2011. Currency negatively impacted revenue
growth by approximately $1 billion.
“In the second quarter, we delivered strong profit,
earnings per share and free cash flow growth. This
performance reflects continued strength in our growth initiatives
and investments in higher value opportunities,” said Ginni
Rometty, IBM president and chief executive officer.
“These are fundamental elements of our long-term
business model.
“Looking ahead, we are well positioned to deliver greater
value to a wider range of clients and to our shareholders.
Given our performance in the first half and our outlook for
the second half, we are raising our full-year operating earnings
per share expectations to at least $15.10.”
Second-Quarter GAAP – Operating (non-GAAP)
Reconciliation
Second-quarter operating (non-GAAP) diluted earnings exclude
$0.17 per share of charges: $0.11 per share for the amortization of
purchased intangible assets and other acquisition-related charges,
and $0.06 per share for retirement-related charges driven by
changes to plan assets and liabilities primarily related to market
performance.
Full-Year 2012 Expectations
IBM raised its expectations for full-year 2012 GAAP diluted
earnings per share to at least $14.40 from at least $14.27 and
operating (non-GAAP) diluted earnings per share to at least $15.10
from at least $15.00. The 2012 operating (non-GAAP) earnings
expectations exclude $0.70 per share of charges for amortization of
purchased intangible assets, other acquisition-related charges, and
retirement-related charges driven by changes to plan assets and
liabilities primarily related to market performance.
Geographic Regions
The Americas’ second-quarter revenues were $11.1 billion,
a decrease of 1 percent (up 1 percent, adjusting for currency) from
the 2011 period. Revenues from Europe/Middle East/Africa were
$7.9 billion, down 9 percent (flat, adjusting for currency).
Asia-Pacific revenues increased 2 percent (up 4 percent,
adjusting for currency) to $6.3 billion. OEM revenues were
$512 million, down 24 percent compared with the 2011 second
quarter.
Growth Markets
Revenues from the company’s growth markets increased 2
percent (up 8 percent, adjusting for currency) and more than 30
countries had double-digit revenue growth, adjusting for
currency. Revenues in the BRIC countries — Brazil,
Russia, India and China — increased 5 percent (up 12
percent, adjusting for currency).
Services
Global Technology Services segment revenues decreased 2 percent
(up 2 percent, adjusting for currency) to $10.0 billion.
Global Business Services segment revenues were down 4 percent
(down 1 percent, adjusting for currency) to $4.7 billion.
Pre-tax income from Global Technology Services increased 24
percent and pre-tax margin increased to 17.1 percent. Global
Business Services pre-tax income increased 7 percent and pre-tax
margin increased to 16.6 percent.
The estimated services backlog at June 30 was $136 billion, down
6 percent year over year at actual rates (flat, adjusting for
currency).
Software
Revenues from the Software segment were $6.2 billion, flat (up 4
percent, adjusting for currency) compared with the second quarter
of 2011. Software pre-tax income increased 8 percent and
pre-tax margin increased to 35.9 percent.
Revenues from IBM’s key middleware products, which include
WebSphere, Information Management, Tivoli, Lotus and Rational
products, were $3.9 billion, flat (up 4 percent, adjusting for
currency) versus the second quarter of 2011. Operating systems
revenues of $628 million were flat (up 3 percent, adjusting for
currency) compared with the prior-year quarter.
Revenues from the WebSphere family of software products
increased 3 percent year over year. Information Management
software revenues decreased 1 percent. Revenues from Tivoli
software increased 2 percent. Revenues from Lotus software
decreased 8 percent, and Rational software decreased 7
percent.
Hardware
Revenues from the Systems and Technology segment totaled $4.3
billion for the quarter, down 9 percent (down 7 percent, adjusting
for currency) from the second quarter of 2011. Systems and
Technology pre-tax income decreased $159 million.
Total systems revenues decreased 7 percent (down 5 percent,
adjusting for currency). Revenues from Power Systems were down
7 percent compared with the 2011 period. Revenues from System
x were down 8 percent. Revenues from System z mainframe server
products decreased 11 percent compared with the year-ago
period. Total delivery of System z computing power, as
measured in MIPS (millions of instructions per second), decreased 8
percent. Revenues from System Storage decreased 4 percent,
and revenues from Retail Store Solutions decreased 4 percent year
over year. Revenues from Microelectronics OEM decreased 22
percent.
Financing
Global Financing segment revenues were flat (up 4 percent,
adjusting for currency) in the second quarter at $517
million. Pre-tax income for the segment increased 6 percent
to $528 million.
***
The company’s total gross profit margin was 47.6 percent
in the 2012 second quarter compared with 46.4 percent in the 2011
second-quarter period. Total operating (non-GAAP) gross profit
margin was 48.2 percent in the 2012 second quarter compared with
46.8 percent in the 2011 second-quarter period, with increases in
Global Technology Services and Global Business Services.
Total expense and other income decreased 5 percent to $7.1
billion compared with the prior-year period. S,G&A
expense of $5.8 billion decreased 3 percent year over year.
R,D&E expense of $1.6 billion increased 1 percent
compared with the year-ago period. Intellectual property and
custom development income decreased to $289 million compared with
$295 million a year ago. Other (income) and expense was
income of $132 million compared with prior-year expense of $97
million. Interest expense increased to $117 million compared
with $97 million in the prior year.
Total operating (non-GAAP) expense and other income decreased 6
percent to$7.0 billion compared with the prior-year period.
Operating (non-GAAP) S,G&A expense of $5.7 billion
decreased 4 percent compared with prior-year
expense. Operating (non-GAAP) R,D&E expense of $1.6
billion was flat compared with the year-ago period.
Pre-tax income increased 6 percent to $5.2 billion and pre-tax
margin of 20.0 percent, up 1.7 points compared with the prior-year
period. Operating (non-GAAP) pre-tax income increased 8
percent to $5.4 billion and pre-tax margin was 21.1 percent, up 2.2
points.
IBM’s tax rate was 24.8 percent, down 0.2 points year over
year; operating (non-GAAP) tax rate was 25.0 percent, flat compared
to the year-ago period.
Net income margin increased 1.3 points to 15.1
percent. Total operating (non-GAAP) net income margin
increased 1.6 points to 15.8 percent.
The weighted-average number of diluted common shares outstanding
in the second-quarter 2012 was 1.16 billion compared with 1.22
billion shares in the same period of 2011. As of June 30,
2012, there were 1.14 billion basic common shares
outstanding.
Debt, including Global Financing, totaled $32.4 billion,
compared with $31.3 billion at year-end 2011. From a
management segment view, Global Financing debt totaled $22.6
billion versus $23.3 billion at year-end 2011, resulting in a
debt-to-equity ratio of 7.0 to 1. Non-global financing debt
totaled $9.8 billion, an increase of $1.8 billion since year-end
2011, resulting in a debt-to-capitalization ratio of 36.1 percent
from 32.0 percent.
IBM ended the second-quarter 2012 with $11.2 billion of cash on
hand and generated free cash flow of $3.7 billion, excluding Global
Financing receivables, up approximately $0.3 billion year over
year. The company returned $4.0 billion to shareholders
through $1.0 billion in dividends and $3.0 billion of share
repurchases.
Year-To-Date 2012 Results
Net income for the six months ended June 30, 2012 was $6.9
billion compared with $6.5 billion in the year-ago period, an
increase of 6 percent. Diluted earnings per share were $5.95
compared with $5.30 per diluted share for the 2011 period, an
increase of 12 percent. Revenues for the six-month period
totaled $50.5 billion, a decrease of 2 percent (up 1 percent,
adjusting for currency) compared with $51.3 billion for the six
months of 2011.
Operating (non-GAAP) net income for the six months ended June
30, 2012 was $7.3 billion compared with $6.8 billion in the
year-ago period, an increase of 9 percent. Operating
(non-GAAP) diluted earnings per share were $6.29 compared with
$5.50 per diluted share for the 2011 period, an increase of 14
percent.
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. Forward-looking
statements are based on the company’s current assumptions
regarding future business and financial performance. These
statements involve a number of risks, uncertainties and other
factors that could cause actual results to differ materially,
including the following: a downturn in economic environment and
corporate IT spending budgets; the company’s failure to meet
growth and productivity objectives, a failure of the
company’s innovation initiatives; risks from investing in
growth opportunities; failure of the company’s intellectual
property portfolio to prevent competitive offerings and the failure
of the company to obtain necessary licenses; cybersecurity and data
privacy considerations; fluctuations in financial results and
purchases, impact of local legal, economic, political and health
conditions; adverse effects from environmental matters, tax matters
and the company’s pension plans; ineffective internal
controls; the company’s use of accounting estimates; the
company’s ability to attract and retain key personnel and its
reliance on critical skills; impacts of relationships with critical
suppliers and business with government clients; currency
fluctuations and customer financing risks; impact of changes in
market liquidity conditions and customer credit risk on
receivables; reliance on third party distribution channels; the
company’s ability to successfully manage acquisitions and
alliances; 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. Any
forward-looking statement in this release speaks only as of the
date on which it is made. 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 and expectations —
- presenting operating (non-GAAP) earnings per
share amounts and related income statement items; - presenting non-global financing
debt-to-capitalization ratio; - adjusting for free cash flow;
- adjusting for currency (i.e., at constant
currency).
The rationale for management’s use of non-GAAP measures is
included as part of the supplemental materials presented within the
second-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 Supplemental 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. The Webcast
may be viewed at www.ibm.com/investor/2q12. Presentation
charts will be available on the Web site shortly before the
Webcast.
Financial Results Below (certain amounts may
not add due to use of rounded numbers; percentages presented are
calculated from the underlying whole-dollar amounts).