Friday, 17 October 2008

IBM’s services storm ahead in Q3

(By Anthony Miller) OK, may be ‘storm’ is a bit OTT, but compared to the raft of gloomy statements from some in the sector, almost anything in positive territory looks ‘storming’. Both of IBM’s services divisions grew revenues and margins (see here). The infrastructure support business, Global Technology Services, grew 5% (constant currency – ccy) and saw gross margins rise 210bps to 32.7% and pre-tax margins by 130bps to 11.6%. The higher value Global Business Services unit grew revenues 3% ccy, with gross margins up a huge 450bps to 27.4% and pre-tax margins up 160bps to 14.0%. Whatever it is they’re doing, they’re certainly doing it right! Well, almost, as services signings in the fell 5% ccy in the quarter to $11.1bn though short-term singings were up 8% ccy. The total services backlog is now $114bn (that’s backlog, not pipeline!) which is around 2 years’ revenues at current run rates.

Performance in some of IBM’s other businesses was quite telling. Total Systems & Technology (basically, hardware) revenues fell 11% ccy, though mainframe server revenues jumped 25%. Go figure. Software revenues grew 8% ccy, with the biggest jump (26%) in Information Management (i.e. middleware) as, presumably, customers strive to eke more useful information from the morass of data produced by their transactional systems. IBM CEO Sam Palmisano remains "confident in our full-year outlook”. I missed last night’s concall (if you must know, I was watching tonight’s Have I Got News For You being recorded – yes, I have got my priorities spot on!) so I will listen to the replay and add some colour and movement to these results later today.

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