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IBM surpasses earnings guidance

Posted: 20 Jul 2006 ?? ?Print Version ?Bookmark and Share

Keywords:earning? IBM? software? Spencer Chin?

Thanks in part to its microelectronics business, IBM posted second-quarter 2006 earnings of $1.30 from continuing operations, up 14 percent from $1.14 per share the second quarter of 2005. Second-quarter income from continuing operations was $2 billion, up 9 percent compared with $1.9 billion in the second quarter of 2005.

Analysts had expected IBM to earn $1.29 per share, according to Thomson Financial.

Second quarter revenue of $21.9 billion decreased 2 percent from the second quarter of 2005, which includes revenue from the divested PC business. Excluding PC revenue, sales rose 1 percent from the second quarter of 2005.

Samuel Palmisano, IBM chairman and chief executive, said in a statement, "IBM had another solid quarter with good earnings-per-share results. Our performance was led by our software business, which generated $4.2 billion of revenue this quarter with strong margins, and is a significant part of our integrated portfolio."

From a geographic perspective, the Americas second-quarter revenues were $9.5 billion, up 1 percent from the corresponding 2005 period. Revenues from Europe/Middle East/Africa were $7.2 billion, down 4 percent, while Asia-Pacific revenue decreased 9 percent slid 3 percent to $4.2 billion.

IBM's chip business saw strong growth. Revenues from IBM's Microelectronics Group increased 45 percent in the quarter.

Hardware revenue decreased 7 percent to $5.1 billion in the second quarter. Hardware revenue for IBM's Systems and Technology Group totaled $5.0 billion, up 3 percent from a year ago.

Gross margin was 41.2 percent, up from 39.4 percent a year ago. Excluding the PC business, second-quarter 2005 gross margin was 40.6 percent.

Total expense and other income increased 1 percent to $6.1 billion compared with the prior-year period, which includes the non-recurring items. SG&A expense decreased 24 percent due to prior-year incremental restructuring charges of $1.5 billion. R&D expense increased 3 percent compared with the year-ago period.

Other (income) and expense was $196 million, compared with $1.7 billion a year ago, reflecting the $775 million benefit for the Microsoft legal settlement and the $1.1 billion gain from the sale of the PC business.

- Spencer Chin
EE Times

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