IBM delivers big profit that beats Wall Street expectations, but revenue falls
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Despite a global economic slowdown, IBM (NYSE: IBM) beat Wall Street expectations with a quarterly profit of $3.28 per share, the company said after the markets closed Tuesday.
Analysts had forecast a profit of $3.03 per share.
No mention was made about any potential staff reductions, however. Rumors about layoffs have circulated widely within IBM in recent weeks, and some analysts had expected IBM to layoff some 15,000 workers.
Rick Hanna, an equity analyst with Morningstar Inc., said he is concerned about the slowdown in some of IBM's hardware sales, since having IBM machines inside a business helps sell software and other services. Still, Hanna said he was "very, very impressed" with IBM's ability to improve profit margins despite the grisly economic landscape.
"When I was reading through it my first comment was 'wow,'" he said. "It really speaks to them developing their high-value-added strategy and executing it. ... You've got to recognize that this isn't your father's IBM. It's not the one that's so hardware-dependent. Software and services tend to be more resilient, and they're proving that."
IBM did not announce widespread job cuts, which some analysts believed were imminent, but repeated that it is still doing targeted layoffs as part of ongoing cost-cutting. IBM lays off thousands of workers each year, but overall head count keeps rising as the company adds jobs in faster-growing regions or more profitable divisions.
IBM employed more than 400,000 people at the end of 2008, the first time in more than 20 years the company's work force has swelled that big. The last time IBM employed a work force that size, a severe downturn caused the company to jettison many of those workers in waves of brutal downsizing.
IBM shed more than 150,000 workers in the 1990s as the company racked up nearly $16 billion in losses over a five-year stretch.
IBM also set records for revenues ($103.6 billion) and pre-tax profits ($16.7 billion) for the year.
Total fourth quarter revenues did decrease to $27 billion, down 6 percent from a year ago. That includes a 1-percent adjust for currency valuations, IBM said in its earnings statement.
Despite a worldwide recession in 2009, IBM forecast a profit of “at least” $9.20 per share in the coming 12 months, IBM added.
Samuel Palmisano, IBM’s chairman and chief executive officer, hailed the quarterly report.
"A strong fourth quarter capped an outstanding year. In 2008 IBM performed well in an extremely difficult economic environment. Clearly our strategic transformation - migrating to the more profitable segments of the industry, investing in growth regions of the world, and driving productivity through global integration - is continuing to pay dividends," Palmisano said in a statement.
IBM employs more than 11,000 people in the Triangle area., its largest concentration of employees in the world.
Big Blue shares closed at $81.98 Tuesday, down $2.94.
For the year 2008, IBM also reported:
- Record revenue of $103.6 billion
- Record pre-tax profit of $16.7 billion
- Record earnings per share of $8.93
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