ibm

IBM reported third-quarter 2014 diluted earnings from continuing operations of $3.46 per share, compared with diluted earnings of $3.77 per share in the third-quarter of 2013, a decrease of 8 percent.  Operating diluted earnings from continuing operations were $3.68 per share compared with operating diluted earnings of $4.08 per share in the third-quarter of 2013, a decrease of 10 percent.

Third-quarter net income from continuing operations was $3.5 billion compared with $4.1 billion in the third-quarter of 2013, a decrease of 17 percent.

For the third-quarter of 2014, IBM reported consolidated net income of $18 million or two cents of diluted earnings per share, which includes a net loss from discontinued operations of $3.4 billion, or $3.44 per diluted common share.

Total revenues from continuing operations for the third-quarter of 2014 of $22.4 billion were down 4 percent (down 2 percent, adjusting for the impact of the divested customer care outsourcing business and for currency) from the third-quarter of 2013.

Ginni Rometty (Chairman, president and chief executive officer, IBM): We are disappointed in our performance.  We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry.  While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas – cloud, data and analytics, security, social and mobile – where we continue to shift our business.  We will accelerate this transformation.

Geographic Regions

The Americas’ third-quarter revenues were $10.1 billion, a decrease of 2 percent from the 2013 period.  Revenues from Europe/Middle East/Africa were down 2 percent to $7.2 billion.  Asia-Pacific revenues decreased 9 percent to $5 billion.

Growth Markets

Revenues from the company’s growth markets were down 6 percent.  Revenues in the BRIC countries — Brazil, Russia, India and China — were down 7 percent.

Services

Global Services segment revenues decreased 3 percent to $13.7 billion.  Global Technology Services segment revenues decreased 3 percent to $9.2 billion.  Global Business Services segment revenues were down 2 percent to $4.5 billion. The estimated services backlog at September 30, 2014 was $128 billion, down 7 percent year to year adjusting for the divested customer care outsourcing business (down 2 percent, adjusting for currency).

Software

Revenues from the Software segment were $5.7 billion, down 2 percent compared with the third-quarter of 2013.  Software pre-tax income decreased 3 percent and pre-tax margin decreased to 35.5 percent.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were $3.7 billion, down 1 percent versus the third-quarter of 2013.  Operating systems revenues of $513 million were down 11 percent compared with the prior-year quarter.

Hardware

Revenues from continuing operations from the Systems and Technology segment totaled $2.4 billion for the quarter, down 15 percent from the third-quarter of 2013.  Systems and Technology pre-tax loss increased $91 million to a loss of $99 million.

Revenues from Power Systems were down 12 percent compared with the 2013 period.  Revenues from System x were down 10 percent.  Revenues from System z mainframe server products decreased 35 percent compared with the year-ago period.  Revenues from System Storage decreased 6 percent.

Gross Profit

The company’s total gross profit margin from continuing operations was 48.6 percent in the 2014 third-quarter period compared with 49.0 percent in the 2013 third-quarter period.

Expense

Total expense and other income from continuing operations increased 1 percent to $6.5 billion compared  with the prior year period.  S,G&A expense of $5.3 billion was flat year over year.  R,D&E expense of $1.4 billion was flat compared with the year-ago period.  Intellectual property and custom development income decreased to $145 million compared with $191 million a year ago.  Other (income) and expense was income of $103 million compared with prior-year income of $63 million.  Interest expense increased to $126 million compared with $97 million in the prior year period.

Cash flow

IBM ended the third-quarter 2014 with $9.6 billion of cash on hand and generated free cash flow of $2.2 billion, excluding Global Financing receivables, down approximately $0.1 billion year over year.  In the third quarter of 2014, the company returned $2.8 billion to shareholders through $1.1 billion in dividends and $1.7 billion of gross share repurchases.  At the end of September 2014, IBM had approximately $1.4 billion remaining from the current share repurchase authorization.

Year-To-Date 2014 Results

Net income from continuing operations for the nine months ended September 30, 2014 was $10.2 billion compared with $10.7 billion in the year-ago period, a decrease of 4 percent.  Diluted earnings per share from continuing operations were $10.09, up 5 percent compared to the 2013 period.  The consolidated diluted earnings per share were $6.44 as compared to $9.27, down 31 percent as compared to the 2013 period. Revenues from continuing operations for the nine-month period totaled $68.7 billion, a decrease of 3 percent (down 3 percent, adjusting for currency) compared with $71.0 billion for the first nine months of 2013.

[Image courtesy: IBM]