International Business Machines Corp. (IBM) Outperforms Analyst Expectations

Page 1 of 2

International Business Machines (NYSE: IBM), a multinational technology company with revenue exceeding $100 billion, announced their Q4 2012 results on Jan. 22. IBM reported quarterly revenue of $29.30 billion and EPS of $5.39, which sent shares up by over 4% on Jan. 23.

Let us look at the following figure. Year-over-year growth in revenue is negative for the December quarter, but EPS has increased many fold. This shows that the company has made significant reductions in costs for the December quarter, a trend that is reflecting in the annual data as well.

Revenue Analysis

Revenues from EMEA were $9.1 billion, 5% less than the previous year. Asia Pacific revenue saw an increase of 4%. OEM revenues decreased 5% to $679 million, while revenue from BRIC (Brazil, Russia, India and China) countries increased by 11%.

Sector data shows us that revenue from the global technology services segment decreased by 2% and global business services revenue came down by 3%. Revenue from the Software Segment increased by 3% and revenue from key middleware products increased by 5%. Operating Systems revenue was $709 million, in line with last year’s revenue, while Information Management Systems revenues increased by 2%. Revenue from the systems and technology segment came down by 1%, and Global Financing segment revenues were down 2%.

IBM reported quarterly revenues of $29.3 billion, far ahead of the analyst expectations of $24.7 billion, and non-GAAP EPS of $5.39, up from the analyst expectations of $5.25.

IBM projects non-GAAP EPS of $16.70 for 2013, as well as an EPS of $16.64 for 2013. The company also plans to increase EPS to $20 by 2015. IBM expects to invest more in areas like Big Data, Mobile Solutions, Social Business, and Security with the aim of expanding into new geographies.

Competition Scenario

The main competitors for IBM are Accenture Plc (NYSE:ACN), Hewlett-Packard Company (NYSE: HPQ) and Microsoft Corporation (NASDAQ: MSFT).

All these companies are established brand names and pose a serious threat to IBM’s revenue. IBM is shifting focus from hardware sales to software services, and companies like Accenture hold a strong market share in this segment. Accenture has great market credibility, and its ability to do quality work at low prices internationally sets it apart from other companies.

Hewlett Packard has a strong presence in the hardware sector. HP will fade out as IBM’s competitor if it is unable to move towards software services, as IBM is already highly focused on software products and services. In the last few months, with declining PC sales overall, HP’s main business line has been under threat. It surprises me that companies like these, with an established presence in the market for so many years, take this much time to understand and adapt to changing market trends. HP has an urgent need to start molding itself to the smartphone world to be able to remain relevant.

Microsoft has a strong presence in the software products segment, and in order to beat this competition IBM will have to invest a lot in innovation for developing cost effective and solution-driven software products which can stand up to the market expectations. It too has been hit, although less hard and for different reasons, by declining PC sales. However, it has begun to slowly adapt itself to the changing scenario by brining out the Windows 8/RT; it remains to be seen how it can bring these products to the market in a more developed condition.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!