IBM reports slight drop in profits

IBM has reported a one per cent drop in profits in its quarterly earnings statement but is bullish about its prospects for the rest of 2009 and beyond.

Speaking during a press call, chief financial officer Mark Loughridge said that recent moves by IBM to lessen its reliance on hardware had left the firm well placed to survive the downturn.

“We’ve built a more resilient business model,” he said. “This year all pre-tax profit came from software, services and financing. Hardware sales are more vulnerable to downturns.”

This was shown in the 24 per cent decline in hardware revenues, with mainframe and server sales falling sharply, although Unix server revenue held up. In comparison, services revenue was down 10 per cent and software sales also down six per cent

Overall, IBM’s quarterly revenue fell by 11 per cent to $21.7bn (£14.9bn), but the company said that seven per cent of that figure was down to the increased strength of the dollar. Profit fell one per cent to $2.3bn (£1.58bn).

The company did particularly well from government spending this quarter, with new signings from the public sector up 200 per cent. Central government was investing in systems that would create jobs, Loughridge said, while local and state governments were more interested in cutting costs.

IBM is now putting more emphasis on global markets in emerging nations, he continued. Sales in India were up 12 per cent, making IBM the largest IT supplier in the region, and up 11 per cent in China.

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