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Hardware drives IBM in Q2

Weak dollar dance

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It was business as usual for IBM in the second quarter, as the company posted modest gains and benefitted from a weak US dollar.

IBM's services, storage and server businesses helped offset an underachieving software business, resulting in total revenue of $23.2bn. This is a 7 percent rise - or just 4 percent in constant currency - over the $21.6bn posted in the same quarter a year ago. IBM's income rose as well, hitting $2.0bn in this year's Q2 versus $1.7bn last year.

"It was another strong quarter for large-scale systems, led by zSeries enterprise servers," said IBM's CEO Sam Palmisano. "IBM Global Services signed more than $10 billion in new business, and we are off to a strong start in the emerging Business Process Transformation Services opportunity. . . . IBM also grew significantly in emerging geographic markets in the first half, with 35 percent combined growth in China, Russia, India and Brazil."

IBM's Global Services unit reported $11.3bn in revenue - a 7 percent year-on-rise or 2 percent rise in constant currency.

Hardware revenue hit $7.4bn in the quarter - a 12 percent year-on-year rise or 10 percent rise in constant currency. As Palmisano stated, IBM's zSeries mainframe unit had a particularly strong run, while its Power-based iSeries and pSeries systems did not sell as well. IBM just rolled out its new Power5 processor and said iSeries and pSeries customers were likely waiting to upgrade to the new chip. IBM's storage and PC businesses also enjoyed a rise in revenue.

The same cannot be said for the software group. Software revenue came in flat at $3.5bn or down 4 percent in constant currency. This is hardly a surprise given recent revenue warnings from a number of major enterprise software sellers.

On a brighter note, IBM's much maligned microelectronics business managed to produce a profit of $111m. That's the first profit for this group since the end of 2002.

IBM's shares were flat during Thursday's trading and remained that way in the after-hours market, at the time of this report. ®

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