Hardware slowdown sours IBM numbers

Services, software soar but mainframes really hurting

Posted in Hardware, 17th October 2007 09:51 GMT

IBM's customers are putting off big hardware buys until the firm refreshes its processor line, the company's latest financials show.

Figures out yesterday showed overall revenues at the giant were $24.1bn for its third quarter ending 30 September, up 6.6 per cent on the year. Net income was up 6.3 per cent to $2.4bn.

The company trumpeted the performance of its services and software arms. Global technology services turned in revenues up 12.8 per cent to $9.5bn with pre-tax income of $1bn, while global business services turned in $4.8bn, up 13.2 per cent, generating pre-tax income of $521m. New contracts totalled $11.6bn, up 12 per cent on the year, while the total backlog stands at $116bn.

Software had total revenues of $5.3bn, with pre-tax income of $1.3bn. The software business generates the biggest gross margin of all IBM's units, a whopping 84.4 per cent.

However, systems and technology saw revenues drop 10.3 per cent to $5.1bn, with pre-tax income coming in at a paltry $361m, down 12.4 per cent. The big brake on the unit's growth seems to be from its System z platform, with "a difficult comparison" seeing revenues on the mainframe business down 31 per cent year on year. The system p and x lines both showed six per cent year on year growth.

In a conference call, CFO Mark Loughridge said customers were putting off server buys while they waited for new processors to hit IBM's ranges and he didn't expect things to pick up in the current quarter.

However, he gave a fillip to the market as a whole, saying it didn't look like recent economic turmoil was affecting sales – other than to the financial sector proper. ®

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