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IBM misses memo on economic slowdown during Q2

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IBM has yet again shrugged off the global economic slowdown with second quarter profits leaping 22 per cent and revenues rising.

Although improvements were reported across most operations, IBM's bread-and-butter services division was the star of the show.

"I've got to say that this is one of the best quarters I've ever seen," said CFO Mark Loughridge, during the companies quarterly investor conference call.

Net income for the quarter was $2.77bn, up from $2.26bn a year earlier. Total revenues rose 13 per cent year-over-year to $26.8bn.

Revenues from software were $5.6bn, an increase of 17 per cent over least year. Systems and Technology revenues were $5.2bn, up 2 per cent year-over-year. IBM said the hardware buzz was driven by double-digit growth in mainframes, Unix servers and storage.

"We entered the second quarter with a strong deal pipeline, and this quarter, frankly, we were sold out," said Loughridge. "Performance was particularly strong in the Americas and Europe, as well as in the Financial Services Sector."

Total global services revenue grew 16 per cent. Breaking that down: tech services revenue was $10.1bn with significant growth reported from existing clients. Business services revenues increased 18 per cent to $5.1bn.

OEM revenues were $706m, down 17 per cent compared with Q2 2007. Sales in IBM's new growth markets organization increased 21 per cent, and represented 18 per cent of geographical revenues.

Big Blue's heavy investments in emerging markets helped avoid the economic malaise in the US and Europe. The company gets about two-thirds of its revenues from overseas sources.

Revenues in the Americas were up 8 per cent at $10.9bn. Europe/Middle East/Africa rose 20 per cent to $9.8bn. Asia-Pacific revenues increased 16 per cent to $5.3bn.

"IBM had an outstanding quarter and a strong first half for 2008. These results demonstrate that IBM has the ability to thrive in both emerging and established markets. Once again, IBMers performed very well around the world," said CEO Samuel Palmisano in a statement.

The company also had a cheery outlook for the rest of 2008, restating its goal to boost annual profits to as much as $11 a share by 2010 by cutting costs in the company's pension plan and continuing to emphasize growth outside of the US. ®

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