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IBM Also Looks Safe

Posted on Friday, Jan 18th 2008

Yesterday, International Business Machines Corporation (NYSE: IBM) officially released its financial results for Q4 and the fiscal year following preannouncement on Monday. Fourth quarter revenue was $28.9 billion, up 10% y-o-y and diluted earnings were $2.80 per share, up 24%y-o-y. For the full fiscal year 2007, total revenues were $98.8 billion, up 8% and diluted earnings were $7.18 per share, up 18%. Share repurchases amounted to about $18.8 billion in 2007.

Segment-wise, Global Technology Services segment revenues grew 12% to $36.1 billion. Global Business Services segment revenues were $18.0 billion, up 13%. Systems and Technology segment revenues declined 3% to $21.3 billion. Software segment revenues went up by 10% to $20.0 billion. Global Financing segment revenues were $2.5 billion, up by 6%.

Terrific performance in a terrific year – no doubt a result of its strong global model. IBM operates in 170 countries, with about 65% of its employees outside US and about 30% in Asia Pacific. For fiscal 2007, revenues from Americas grew 4% to $41.1 billion (42% of total revenue), EMEA grew 14% to $34.7 billion (35%of total revenue), and Asia-Pacific grew by 11% to $19.5 billion (19.7% of total revenue). IBM sees growth prospects not just in BRIC but also countries like Malaysia, Poland, South Africa, Peru, and Singapore.

For the fourth quarter, 65% revenue came from outside US. Revenues from Americas grew 5% y-o-y to $11.7 billion, EMEA grew 16% y-o-y to$10.8 billion, and Asia-Pacific grew 15% to $5.5 billion. However, revenues from Japan grew modestly and excluding Japan Asia Pacific grew 20%. In India, IBM signed more than $1.4 billion in new domestic services contracts. Read my earlier post on IBM’s India strategy in which I suggest that IBM would be acquiring niche Indian IT services firms.

Talking of acquisitions, a major acquisition this year was of Cognos for $5 Billion in the hot Business Intelligence market. It recently announced the acquisition of XIV to strengthen its storage portfolio and take on emerging opportunities like Web 2.0 applications and digital media. I follow its acquisition spree over the last three years here, here, and here.

As I have said before, IBM has been strengthening its portfolio with a series of acquisitions and has been exiting slow growing hardware businesses. Its strong portfolio and strong global model will see it through its target of delivering an EPS growth of 15-16% in the range of $8.20 to $8.30 in 2008, recession or no recession. Its stock is currently trading around $101 and its market cap is around $139 billion.
International Business Machines Corp. (IBM)

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