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Servers carry IBM to solid Q1

A little currency love too

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A solid performance from IBM's server unit helped carry the company to a decent first quarter.

IBM reported $22.2bn in total revenue for the quarter, which stands as an 11 per cent increase over the $20.1bn posted a year ago. Net income also increased to $1.6bn up from $1.4bn.

"IBM continued to out-perform the industry in our selected segments and gained share," said Sam Palmisano, CEO at IBM. "We continued our industry-leading work in services with more than $10bn in signings after a very strong fourth quarter of signings, and we grew our software and systems businesses, with significant progress in zSeries (mainframe) servers and WebSphere middleware. We delivered double-digit growth in emerging markets such as China, Eastern Europe, India and Brazil. Our balance sheet remains strong, with $8.5bn of cash on hand."

As has been the case of late, IBM's results were boosted favorable currency conditions. For example, the 11 per cent total revenue gain drops to 3 per cent in constant currency. IBM's hardware business was the only major group to post double-digit gains in constant currency.

The first quarter success of the hardware team should come as no surprise. IBM has been steadily gaining share against competitors in both the Intel/AMD and Unix markets.

In Q1, IBM's hardware revenue rose 16 per cent (10 per cent in constant currency) to $6.7bn. A 100 percent increase in mainframe "computing power" was a major driver for this business. Since last year's Q1, IBM has rolled out several new mainframe systems. Intel/AMD and Unix server revenues were up as well.

IBM's software business pumped out $3.5bn in sales - an 11 per cent year-over-year increase (3 per cent with currency adjustments). The PC division increased revenue 18 per cent to $2.8bn. On the down side, IBM's financing operations saw revenue drop 6 per cent to $662m.

IBM's oft talked about global services group managed to increase revenue 9 per cent to $11bn from $10.2bn last year.

While IBM said its growth was ahead of competitors, recent results do not really back up the claims. IBM's microelectronics business, for example, had a $154m loss in the quarter - much higher than the $11m loss in the year earlier period. Intel and AMD, by contrast, posted solid results.

In hardware, IBM faired only okay. Storage-heavy EMC posted much stronger overall growth, and Dell recently upped an already optimistic forecast.

IBM's only real whipping boy was Sun.

All in all, however, it's hard to compare more specialized companies against IBM. The best head-to-head mark will come when HP reports its results. ®

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