IBM announced fourth-quarter 2011 diluted earnings of $4.62 per share, compared with diluted earnings of $4.18 per share in the fourth quarter of 2010, an increase of 11 per cent. Fourth-quarter net income was $5.5 billion compared with $5.3 billion in the fourth quarter of 2010, an increase of 4 per cent.
Total revenues for the fourth quarter of 2011 of $29.5 billion increased 2 per cent (1 percent, adjusting for currency) from the fourth quarter of 2010. While currency provided a benefit to revenue growth of approximately 25 basis points in the quarter, currency movements since the company announced its third-quarter earnings in October impacted fourth-quarter revenue by approximately one point of growth, or $300 million.
Ginni Rometty (President and chief executive officer, IBM): We had a strong fourth-quarter performance, capping a year of record earnings per share, revenue, profit and free cash flow.
We delivered outstanding results in all four of our strategic initiatives for the quarter and the year, as we continued to realize the benefit of our long-term investments in growth markets, business analytics, Smarter Planet solutions and cloud.
We are well on track toward our long-term roadmap for operating earnings per share of at least $20 in 2015.
Full-Year 2012 Expectation: IBM said that it expects to deliver full-year 2012 earnings per share of at least $14.16.
Geographic Regions: The Americas’ fourth-quarter revenues were $12.5 billion, an increase of 3 per cent from the 2010 period. Revenues from Europe/Middle East/Africa were $9.6 billion, up 1 per cent. Asia-Pacific revenues increased 2 per cent to $6.7 billion. OEM revenues were $714 million, down 9 per cent compared with the 2010 fourth quarter.
Growth Markets: Revenues from the company’s growth markets increased 7 per cent. Revenues in the BRIC countries — Brazil, Russia, India and China — increased 10 per cent.
Services: Global Technology Services segment revenues increased 3 per cent to $10.5 billion. Global Business Services segment revenues were up 3 per cent at $4.9 billion.
Pre-tax income from Global Technology Services increased 18 per cent; pre-tax margin increased to 18 per cent. Global Business Services pre-tax income increased 14 per cent; pre-tax margin increased to 16.6 per cent.
The estimated services backlog at December 31 was $141 billion, up $4 billion as reported, quarter to quarter, and down $2 billion as reported, year over year. Services backlog at the end of a quarter measures the current value of work under contract expected to be recognized as revenue in future quarters.
Software: Revenues from the Software segment were $7.6 billion, an increase of 9 per cent. Software pre-tax income of $3.7 billion increased 12 per cent year over year.
Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $5.2 billion, an increase of 11 per cent versus the fourth quarter of 2010.
Operating systems revenues of $710 million increased 3 per cent compared with the prior-year quarter.
Revenues from the WebSphere family of software products increased 21 per cent year over year. Information Management software revenues increased 9 per cent. Revenues from Tivoli software increased 14 per cent. Revenues from Lotus software decreased 2 per cent, and Rational software increased 4 per cent.
Hardware: Revenues from the Systems and Technology segment totaled $5.8 billion for the quarter, down 8 per cent from the fourth quarter of 2010. Systems and Technology pre-tax income was $790 million, a decrease of 33 per cent.
Total systems revenues decreased 7 per cent. Revenues from Power Systems increased 6 per cent compared with the 2010 period. Revenues from System z mainframe server products decreased 31 per cent compared with the year-ago period which was the first full quarter after a new product introduction. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 4 per cent. Revenues from System x decreased 2 per cent. Revenues from System Storage decreased 1 per cent, and revenues from Retail Store Solutions increased 9 per cent year over year. Revenues from Microelectronics OEM decreased 11 per cent.
Financing: Global Financing segment revenues decreased 13 per cent in the fourth quarter to $548 million. Pre-tax income for the segment decreased 9 percent to $514 million.
The company’s total gross profit margin was 49.9 per cent in the 2011 fourth quarter compared with 49.0 percent in the 2010 fourth-quarter period. Total expense and other income increased 2 per cent to $7.4 billion compared with the prior-year period. S,G&A expense of $6.1 billion increased 2 per cent year over year compared with prior-year expense. R,D&E expense of $1.6 billion decreased 1 per cent compared with the year-ago period. Intellectual property and custom development income decreased to $253 million compared with $318 million a year ago. Other (income) and expense was income of $44 million compared with prior-year income of $42 million. Interest expense increased to $113 million compared with $102 million in the prior year.
In the quarter, IBM generated free cash flow of $9.0 billion excluding Global Financing receivables, up approximately $300 million year over year.
Full-Year 2011 Results
Net income for the year ended December 31, 2011 was $15.9 billion compared with $14.8 billion in the year-ago period, an increase of 7 per cent.
Diluted earnings were $13.06 per share compared with $11.52 per diluted share in 2010, an increase of 13 per cent. This was the company’s 9th consecutive year of double-digit EPS growth.
Revenues for 2011 totaled $106.9 billion, an increase of 7 per cent compared with $99.9 billion in 2010.
Geographic Regions: From a geographic perspective, the Americas’ full-year revenues were $44.9 billion, an increase of 7 per cent from the 2010 period. Revenues from Europe/Middle East/Africa were $34.0 billion, an increase of 7 per cent. Asia-Pacific revenues increased 9 per cent to $25.3 billion. OEM revenues were $2.7 billion, down 2 per cent compared with 2010.
Growth Markets: Revenues from the company’s growth markets increased 16 per cent, and represents 22 per cent of IBM’s total geographic revenue. Revenues in the BRIC countries — Brazil, Russia, India and China — increased 19 per cent.
Segments: Total Global Services revenues increased 7 per cent. Revenues from the Global Technology Services segment totaled $40.9 billion, an increase of 7 per cent compared with 2010. Revenues from the Global Business Services segment were $19.3 billion, up 6 per cent. Software segment revenues in 2011 totaled $24.9 billion, an increase of 11 per cent. Systems and Technology segment revenues were $19.0 billion, an increase of 6 per cent. Global Financing segment revenues totaled $2.1 billion, a decrease of 6 per cent.
The company’s total gross profit margin was 46.9 per cent in 2011 compared with 46.1 per cent in 2010. Overall gross profit margins improved year over year for the 8th consecutive year.
IBM ended 2011 with $11.9 billion of cash on hand and generated free cash flow of $16.6 billion excluding Global Financing receivables, up approximately $300 million year over year. The company returned $18.5 billion to shareholders through $3.5 billion in dividends and $15.0 billion of share repurchases.