IBM misses revenue expectations again

IBM has reported second quarter revenues of $24.9bn, missing market estimates of $25.39bn but earning per share of $3.91, which is 14 cents better than analysts forecast.

Profit was also down at $3.23bn, a drop of 17% compared with the same period in 2012.

Last quarter, IBM's revenues and profit fell short of analysts' forecasts for the first time in eight years.
IBM raised its full-year earnings per share by 20 cents to at least $16.90. This excludes the $1bn in charges for its "workforce rebalancing", which includes layoffs.

In the first half of the year, software revenue was up 4%; services revenue down 4%; systems and technology revenue down 12%; business analytics revenue up 11%; and cloud revenue was up 70%.
As a result of the poor first quarter, the company cut jobs and focused on data analysis and cloud computing in an effort to stabilise its business.

More than 3,300 jobs were lost. IBM expects the savings in wages to start taking effect in the third quarter.
Although many technology companies have been hit by the global decline in PC sales, IBM insulated itself from the trend by selling its PC division to Lenovo for $1.75bn in 2005.

Revenue Falls, but Profit Tops Forecast at I.B.M.

The company’s software delivered a strong performance, profit margins rose, and new contract signings in its major services like data analysis rose sharply — an encouraging sign of future business. But its hardware business continues to struggle.

 
“The results are positive compared to earnings expectations,” said A. M. Sacconaghi, an analyst at Sanford C. Bernstein. “But it’s mixed.”

 
I.B.M. and investors focused on the positive side. The company raised guidance for earnings per share for the year by 20 cents to “at least $16.90 a share.”

 
In after-hours trading, I.B.M. shares rose 2.6 percent, or more than $5. The stock closed the regular trading session up 70 cents at $194.55.

 
The company’s net income fell 17 percent, to $3.2 billion, or $2.91 a share, compared with nearly $3.9 billion in the year-ago period. That includes a charge of about $1 billion for trimming its work force. I.B.M. announced in April that it would take that charge this quarter and that most of the affected workers would be outside the United States.

 
In recent years, I.B.M. has taken annual charges that average several hundred million dollars for what it calls “work force rebalancing.” The company sheds workers in higher-cost nations and in businesses that are being trimmed, and it adds employees elsewhere, especially in India.

 
I.B.M. says the process reflects both financial discipline and globalization as it hires and invests in faster-growing markets. The net effect has been an expansion of its global work force to more than 430,000.
What is mainly different this time, analysts say, is that the work force charge is being taken in a single quarter rather than being spread across an entire year. The company’s operating earnings, which exclude the charge for work force cuts, rose 3 percent, to $4.3 billion, or $3.91 a share. The result was well above the average analyst estimate of $3.77 a share, according to Thomson Reuters.

 
Operating earnings per share rose 8 percent, reflecting fewer shares outstanding, because I.B.M. steadily buys back its own shares. Revenue fell 3 percent, to $24.9 billion, below the Wall Street forecast of $25.4 billion.

 
I.B.M. is the largest supplier of information technology — hardware, software and services — to corporations and government agencies worldwide, and its results are watched as a guide to broader trends in business technology spending.

 
Globally, the growth in technology spending has softened, as once-hot markets like China and Brazil cool and Europe remains in an economic slump. For I.B.M., the China business was soft, but Brazil did well, Mark Loughridge, I.B.M.’s chief financial officer, said in a conference call.

 
I.B.M. has met the challenge of economic turmoil and new waves of technology more nimbly than most of its established rivals. It moved quickly to expand in emerging markets, shift to higher-profit products and services, and cut costs.

 
But in the first quarter of this year, I.B.M. reported disappointing earnings, below analysts’ forecast for the first time since early 2005.

 
Businesses that I.B.M. has earmarked for growth are thriving. One of these is software and services for mining vast amounts of data from the Web, sensors and smartphones, to be used to find ways to increase sales or cut costs.

 
But the question for established companies like I.B.M. is whether newer, more profitable businesses can grow fast enough to offset the competition from emerging rivals and new technology.

 
A prime example is cloud computing, a fast-growing market for computing sold to businesses as a service over the Internet. The low-cost cloud model threatens traditional technology suppliers. Amazon is the early leader in the cloud business.

 
I.B.M. is investing in cloud computing. Last month, it announced plans to buy SoftLayer Technologies, a cloud computing company, in a deal valued at about $2 billion.

 
“I.B.M. is making strong plays in new technologies like cloud, but the question is whether it is moving fast enough,” said Frank Gens, chief analyst at the International Data Corporation, a research group.
In the past, I.B.M. has also aggressively pulled out of areas with declining margins, like its personal computer business, which it sold to Lenovo in 2005.

 
Recently, I.B.M. has talked to Lenovo about a deal for I.B.M.’s unit that sells so called industry-standard data center computers, typically powered by Intel chips, analysts say. Talks apparently broke off in May, when the two sides could not agree on a price. But Mr. Loughridge said I.B.M. was in “active discussions.” That business represents about $5 billion in sales for I.B.M., but competition is fierce.

A.M.D. Sees Higher Revenue in Move Into Game Market

Still, A.M.D. said gross margins would fall as it sought a foothold in game consoles.

A.M.D., which for decades has competed against the semiconductor market leader, Intel, in supplying chips for PCs, is rushing to refocus on new markets as consumers buy fewer laptops and more tablets and smartphones.


A.M.D. processors are being used in Microsoft’s coming Xbox One and Sony’s next-generation PlayStation game consoles. These devices are largely behind A.M.D.’s upbeat revenue forecast.


A.M.D. said its gross margin in the second quarter was 40 percent and would fall to about 36 percent in the third quarter. Analysts on average had expected a third-quarter gross margin of 39 percent.


With consumers increasingly playing games on tablets, it is also unclear how many of the new consoles Microsoft and Sony will sell, but optimism about the impact on A.M.D.’s revenue has helped drive its stock up 73 percent since the beginning of April.


Intel warned on Wednesday that it did not expect revenue to grow in 2013 because of slowing PC industry.

Global shipments of personal computers dropped 11 percent in the second quarter, the fifth consecutive quarterly decline in a market that has been devastated by the popularity of tablets.


A.M.D. reported second-quarter revenue of $1.16 billion, down from $1.41 billion a year earlier. It said third-quarter revenue would rise 22 percent, plus or minus 3 percent, compared with the June quarter. That increase would take it to about $1.42 billion.


Analysts, on average, had expected revenue of $1.11 billion in the second quarter and $1.22 billion in the third quarter, according to Thomson Reuters.


A.M.D. posted a net loss of $74 million, or 10 cents a share, in the second quarter, compared with a profit of $37 million, or 5 cents a share, in the same quarter last year.


The company, which is based in Sunnyvale, Calif., said that excluding onetime items, its loss was 9 cents a share, better than the 12-cent loss expected by analysts. 

Consumer shift to mobile devices boosts Google's revenue

Aided by consumers’ shift to mobile devices, Google’s second-quarter revenue increased by 19 percent to about $14 billion, the company announced Thursday.

The Internet company generated sales of $14.11 billion for the quarter, which ended June 30. The revenue excludes the commissions and fees that Google pays to other sites that run its ads. Taking those into account, the company’s second-quarter revenue was $11.1 billion.

The company’s second-quarter rise in revenue constitutes a moderate slowdown in revenue gains of 31 percent that Google reported in April, but is up 19 percent compared to the year-ago quarter.

Larry Page
Google also posted net income of $3.23 billion, or $9.54 a share, up roughly 16 percent from $2.79 billion, or $8.42 a share, in the second quarter of 2012. But net income dipped slightly from the $3.35 billion reported in the first quarter of this fiscal year.

Still, it was “a great quarter,” Google CEO Larry Page said in the company’s earnings announcement. “The shift from one screen to multiple screens and mobility creates tremendous opportunity for Google,” he said.
“With more devices, more information, and more activity online than ever, the potential to improve people’s lives even more is immense,” he added.

Google saw more mixed results within its advertising business. Paid clicks, or the clicks on search ads that advertisers pay for, increased approximately 23 percent over 2012’s second quarter.

However, the cost of paid clicks, or the money Google charges when someone clicks on an ad, fell by 6 percent compared to the same period last year.

Google-owned sites generated 68 percent of the company’s total revenue in the quarter, at $8.87 billion, Google reported, representing an 18 percent increase over 2012’s second quarter. Partner sites contributed revenue of $3.19 billion, or 24 percent of total company sales. “Other” revenue from Google was $1.05 billion, representing a 138 percent increase, the company said. It did not provide information about sources for that revenue.

Meanwhile, Google’s Motorola mobile revenue, which includes hardware, was $998 million, representing 7 percent of consolidated revenue for the quarter, the company reported, up from $843 million in the year-ago period.

Google bought Motorola Mobility last year for more than $12 billion; the closely watched Moto X smartphone is expected to launch this summer. 

Verizon's mobile and Fios drive revenue growth

Verizon Communications has reported a revenue increase of 4.3 percent for the second quarter of 2013, compared to a year ago, with mobile and Fios broadband customers additions driving the growth.
Verizon on Tuesday reported a net increase of 1 million mobile customers and 161,000 Fios broadband customers during the quarter.

The company reported revenue of $29.8 billion in the second quarter. Net income for the quarter was $5.2 billion, up 21 percent from the $4.3 billion Verizon reported in the second quarter of 2012.
Adjusted earnings per share were $0.73, beating analyst estimates by one cent.

Verizon pointed to mobile and broadband growth as a cause for a strong quarter. “We are executing well in these key areas,” Fran Shammo, Verizon’s CFO, said during a conference call.

Mobile revenue was $20 billion in the second quarter of 2013, up 7.5 percent from $18.6 billion during the second quarter of 2012. At the end of the second quarter, the company had 100.1 million wireless retail customers, a 6.3 percent increase in the past year.

In broadband, Verizon added 161,000 Fios Internet customers and 140,000 Fios TV customers in the second quarter. Verizon had 5.8 million Fios Internet and 5 million Fios TV customers at the end of the quarter, representing year-over-year increases of more than 12 percent for each service.

Verizon reported 8.9 million broadband customers at the end of the second quarter, a 1.9 percent increase from a year ago. With DSL losses partially offsetting Fios gains, Verizon added 45,000 broadband customers during the quarter.

Verizon’s wireline division posted revenue of $9.7 billion during the quarter, down from $9.9 billion in the second quarter of 2012.

Consumer revenue grew, however, with Verizon reporting $3.6 billion, an increase of 4.7 percent from the second quarter of 2012. Fios revenue grew 14.7 percent, to $2.7 billion. 

IBM says profit, revenue fell but raises expectations for year

A rebound for IBM failed to materialize in the second quarter, as profit and sales declined along with a slump in revenue from hardware and services.

However, in its quarterly financial report Thursday, the company raised its forecast for earnings per share, excluding restructuring charges, for the year.

Kathleen KeoughIBM's Q2 2013 results included losses in revenue and profit (click to enlarge). Second-quarter net income declined 17 percent from the year-earlier period to $3.2 billion, while revenue declined by 3 percent to $24.9 billion. Adjusting for currency fluctuations, revenue was down 1 percent.
Revenue was under the forecast of $25.37 billion from analysts polled by Thomson Reuters. However, operating earnings per share, excluding restructuring charges, was $3.91, above the analyst forecast of $3.77.

IBM raised its full-year earnings forecast to $16.90 a share, up from $16.70 previously. The numbers exclude restructuring and other charges.

The decline in both profit and revenue was worse than last quarter, when IBM reported a 5 percent decline in revenue to $23.4 billion and a 1 percent drop on net income to $3 billion.

But traders, apparently pleased by IBM earnings-per-share numbers, boosted company shares in after-hours trading to $194.55, up by $0.70 from the day’s closing number.

IBM is generally considered a bellwether for the tech industry due to its global reach and broad portfolio of software, hardware and services. What’s more, in a sign of the company’s importance as an indicator for markets in general, it is the most heavily weighted stock on the Dow Jones Industrial Average index.
Though services and overall hardware sales dropped during the second quarter, company officials stressed strength in software and big systems.

“In the second quarter, we delivered strong performance in our higher-value software and mainframe businesses,” said Ginni Rometty, IBM chairman, president and chief executive officer. Rometty said she expects improvement in the last half of the year, partly as a result of restructuring efforts that include acquisitions, sales of nonstrategic businesses and “skills rebalancing.”

Software sales totaled $6.4 billion, an increase of 4 percent year over year. Middleware, including WebSphere, information management, Tivoli and Social Workforce Solutions (formerly Lotus), generated $4.3 billion in revenue, up 9 percent.

The company’s key Global Technology Services segment, however, suffered a 5 percent decline in revenue to $9.5 billion.

Revenue for the Systems and Technology unit, which includes hardware products, was $3.8 billion, down 12 percent.

Revenue for major geographic segments of the company’s business were flat or in decline during the quarter. Revenue for the Americas was $10.7 billion, a decrease of 3 percent; revenue from the Europe/Middle East/Africa area was flat at $7.8 billion; and Asia-Pacific revenue decreased 8 percent to $5.8 billion.  

Infosys posts strong revenue growth as markets recover

Infosys posted strong revenue growth in the second quarter as demand picked up in key markets including the U.S.

However, the Indian outsourcer’s net profit grew only 0.5 percent year on year as the company increased salaries for staff in India and elsewhere.

Profit was also affected by currency fluctuations, particularly the depreciation of the Australian dollar, and low staff utilization, said Ashok Vemuri, Infosys’ head of Americas, on Friday.

Revenue was close to $2 billion in the quarter, up by 13.6 percent year-on-year. Net profit for the quarter was $418 million.

Infosys has also maintained its earlier forecast for revenue growth of 6 to 10 percent for its fiscal year to March 31, 2014. The forecast does not, however, factor in an immigration bill in the U.S., which if passed in its current form could increase costs for outsourcers and lead to more work getting done offshore, Vemuri said.

The bill would among other things prevent companies with more than 15 percent of their U.S.-based staff on H-1B visas from placing those employees to work on-site for U.S. companies. It was passed by the U.S. Senate, but has encountered difficulties in the House of Representatives.

The strong revenue growth comes after a quarter when Infosys saw its revenue grow 9.4 percent, but profit decline by about 4 percent. Once the darling of investors, Infosys was seeing lackluster growth in revenue and profit compared to Indian competitors such as Tata Consultancy Services. This led Infosys’ co-founder and first CEO N. R. Narayana Murthy to return to the company as executive chairman on June 1.

In the U.S., Infosys benefited during the quarter from a recovery in the economy, and saw its business from the automotive sector grow strongly as car sales picked up, Vemuri said. Growth from financial services in the U.S. is still not as strong, while demand from Europe is still slow, he added.

The outlook is good for the company, as many large outsourcing deals come up for renewal in the industry, Vemuri said. The company’s “Infosys 3.0” strategy, which aims at a greater focus on reusable platforms and products, and high value services like consulting and systems integration, is paying off, he said. “In spite of an environment where discretionary spend continues to be challenged, we continue to grow our consulting and systems integration,” Vemuri added.

Infosys added 575 staff in the quarter, taking the total to 157,263 employees as on June 30. It also added 66 clients in the quarter.