Big Blue revenues rise despite grey power hit

By Steve Malone

Posted on 19 Oct 2004 at 10:00

Big Blue was hit by big grey yesterday as IBM released its third quarter results. The company took a one time pre-tax hit on the bottom line of some $320mn to partially settle a dispute over its pension fund.

Its final third quarter income was $1.8bn an increase of just one per cent over the same quarter in 2003. Without the settlement of the pension claims, this would have been a 12 per cent increase.

The CEO Samuel Palmisano, put a brave face on what was sure to be seen as a wobble on Wall Street saying, 'In what is normally a challenging quarter for the technology industry, IBM delivered one of our strongest third quarters in revenue and earnings growth in recent years. IBM has been gaining momentum throughout the year, and the strength of our integrated business model gives us confidence as we look toward 2005.'

IBM is continuing its transformation into a services company. Its grandly-titled Business Performance Transformation Services revenue has grown more than 45 per cent with strong growth in ermeging markets such as China, India, Brazil and Russia.

By contrast, over at the Hardware division revenues went up 12 per cent to $7.5bn in the third quarter against the third-quarter 2003. The company says that xSeries Intel-based servers did well in a fiercely competitive market, partly at the expense of the iSeries midrange servers whose sales fell significantly. The Thinkpad notebook range remains the star turn at the Personal Systems Group which turned in revenues $3.3bn up 17 per cent.

The fortunes of the Software division were also mixed. Sales were up to $3.6bn, an increase of five per cent, but only one per cent when allowing for the weak dollar. Revenues from IBM's middleware brands, which include WebSphere, DB2, Rational, Tivoli and Lotus products, were $2.9bn, six per cent on the third quarter of 2003. Operating systems revenues fell by two per cent to $600mn compared with the Q3 2003 partly as a result of IBM's transition to much of the company's range to Linux where the company makes its money back on services.

IBM's shares rose 2.39 per cent in after hours trading.