IBM grows profit despite sales decline

IBM is optimistic for 2009 profit

IBM has reported a 14 per cent increase in third-quarter profit, despite sales falling by seven per cent.

The IT giant achieved revenue of $23.6bn (£14.4bn), with net income of $3.2bn (£1.9bn). The biggest success in the quarter came from IBM’s Websphere range of middleware products, which saw sales grow by 14 per cent year on year.

Most other areas of Big Blue’s business saw revenue decline compared with the same period last year: the Global Services division fell seven per cent to $13.7bn; consulting and systems integration was down 16 per cent to $5.1bn; software sales of $5.1bn were down three per cent; although outsourcing revenue was up one per cent to $6.7bn.

Geographically, the Europe, Middle East and Africa region was hardest hit, with revenue down 12 per cent to $7.8bn; in the Americas, sales fell five per cent to $9.9bn, while Asia-Pacific was flat at $5.2bn.

IBM chief executive Samuel Palmisano said the growth in profit was a reflection of the firm’s move to a higher-margin software and services business.

“Our long-term strategic shift to higher-value businesses again enabled us to deliver outstanding margin, earnings and cash flow growth in the third quarter,” said Palmisano.

“We also saw improved revenue trends in our business and share gains in software and hardware. We continued to invest for growth in areas where clients saw potential for value creation including Smarter Planet solutions, cloud computing and advanced business analytics. We are optimistic about 2009 as we again raise our full-year expectations.”

IBM raised its earnings per share forecast for the full financial year and said it expects profit from software and services to achieve double-digit growth in 2009.