IBM Computer Hardware Sales Drop Sharply

By Jessica Davis  |  Print this article Print

IBM's software and services businesses protected IBM from sharper revenue declines in Q1 as the company's computer hardware sales fell 23 percent in Q1. Overall revenues declined 11 percent for IBM, which reported earnings in the shadow of Oracle's announced plans to acquire Sun Microsystems.

IBM (NYSE:IBM) posted lower revenues and net income for its fiscal Q1, with services and software sales showing less of a decline than hardware sales.
IBM reported net income of $2.3 billion in Q1, down 1 percent from the same quarter last year. Revenues dropped to $21.7 billion, an 11 percent drop from the same period a year ago.

Bernstein Research warns that IBM's drop from Q4 to Q1 could bode poorly for other technology companies who have yet to announce earnings.

"IBM's results suggest that technology spending appears to have decelerated further in Q1 from Q4 levels in all geographies, which may suggest revenue downside to other technology names, especially those with transactional business models," says Toni Sacconaghi, a senior analyst at Bernstein Research in a brief report issued today. "Notably, it appears March was the weakest month for IBM, particularly for hardware and consulting services."

Global Services, Global Technology Services, and Global Business Services revenues each declined 10 percent.  IBM says it signed services contracts in the quarter totaling $12.5 billion, a decrease of 1 percent. Shorter-term signings were $5.5 billion, a 14 percent decrease while longer-term signings increased 14 percent, IBM says. The estimated services backlog on March 31 was $126 billion compared with $130 billion at year-end 2008.

Bernstein Research says while service revenues were weaker than expected, signings and business trends were in line with expectations. The firm also notes that outsourcing remained strong while consulting contiued to weaken.

Software revenues came in at $4.5 billion, a 6 percent decline. Within software, IBM’s WebSphere family of software products provided a bright spot with revenues increasing 5 percent year over year.

IBM’s Systems and Technology computer hardware organization reported revenues of $3.2 billion for the quarter, down 23 percent.

Global Financing segment revenues fell 9 percent to $578 million.

IBM shares opened at $98.41 today and were trading at $101.65 at mid-day.

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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