IBM: IBM Earnings Nothing to Write Home About
IBM Reports 2007 First-Quarter Results: Financial News - Yahoo! Finance
IBM (IBM - Annual Report) today announced first-quarter 2007 diluted earnings of $1.21 per share from continuing operations, an increase of 12 percent as reported, compared with diluted earnings of $1.08 per share in the first quarter of 2006. First-quarter income from continuing operations was $1.8 billion compared with $1.7 billion in the first quarter of 2006, an increase of 8 percent. Total revenues for the first quarter of 2007 of $22.0 billion increased 7 percent (4 percent, adjusting for currency) from the first quarter of 2006.
We don’t know how much the estimates incorporated currency issues, but the $22 billion was slightly ahead of consensus estimates for sales. However, 4% growth on a constant currency basis (or even 7% growth as reported) is hardly anything to write home about. The stock traded down after market hours. Our assessment that “it would be a near-disaster if they miss” appears to have been narrowly averted.
Although sales in the Global Services division (IBM’s largest) were up 8% year/year, contract signings were 2% lower than last year. This will make it difficult to maintain the current growth rate, particularly since businesses already appear to be pulling back. In response to a conference call question about the fairly weak growth during the quarter in the U.S. management replied:
And the U.S. had actually a pretty good January and a pretty good February. The falloff was really in the last month of the quarter. And as I said earlier Toni, that was predominantly in our enterprise customer set.
We noted earlier this month that business IT buyers appeared to be pulling back. This is just one more piece of evidence.
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