New York Times [I.B.M. Posts Strong Preliminary Results] said "The fourth quarter usually is the best time of the year for IBM Corp., but rarely does it look this good." When the final results were posted last Thursday, Steve Lohr wrote[IBM - A Separate Reality?]. Here'san excerpt:
But what was striking in the company’s conference call on Thursday afternoon was the unhedged optimism in its outlook for 2008, given the strong whiff of recession fear elsewhere.
The questions from Wall Street analysts in the conference call had a common theme. Why are you so comfortable about the 2008 outlook? Now, that might just be professional churlishness, since so many of them have been so wrong recently about I.B.M. Wall Street had understandably thought, for example, that I.B.M.’s sales to financial services companies — the technology giant’s largest single customer category — would suffer in the fourth quarter, given the way banks have been battered by the mortgage credit crunch.
But Mr. Loughridge said that revenue from financial services customers rose 11 percent in the fourth quarter, to $8 billion. The United States, he noted, accounts for only 25 percent of I.B.M.’s financial services business.
The other thing that seems apparent is how much I.B.M.’s long-term strategy of moving up to higher-profit businesses and increasingly relying on services and software is working. Its huge services business grew 17 percent to $14.9 billion in the quarter. After the currency benefit, the gain was 10 percent, but still impressive. Software sales rose 12 percent to $6.3 billion.
Trade Radar poses the question[IBM Beats -- but is itrepresentative of entire tech sector?]. Here's an excerpt:
Looking at IBM's business segments, it can be seen that they offer far more coverage of the technology space that those of the typical tech company:
IBM is just so big and diversified that there is little comparison between it and most other tech companies. IBM is a member of an elite group of companies like Cisco Systems (CSCO), Microsoft (MSFT), Oracle (ORCL) or Hewlett-Packard (HPQ).
IBM's wide international coverage and deep technological capabilities dwarf those of most tech companies. Not only do they have sales organizations worldwide but they have developers, consultants, R&D workers and supply chain workers in each geographic region. Their product mix runs from custom software to packaged enterprise software, hardware (mainframes and servers), semiconductors, databases, middleware technology, etc., etc. There are few tech companies that even attempt to support that many kinds and variations of products.
As color on the fourth quarter earnings announcement, there are a couple of observations that I would like to make. The first one speaks to IBM's international prowess. The company indicated that growth in the Americas was only 5%. International sales were a primary driver of IBM's good results. As an insight on the difference between IBM and most other tech companies, it is clear that nowadays, a tech company that isn't adept at selling internationally is going to be in trouble.
Sramana Mitra opines [IBM Also Looks Safe]. Here's an excerpt:
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.
Meanwhile, Dan Farber and Larry Dignan from ZDnet write[IBM’s alternate universe: Big Blue sees great 2008]. Here'san excerpt:
Thus far 2008–all two weeks of it–hasn’t been a pretty for the tech industry. Worries about the economy prevail. And even companies that had relatively good things to say like Intel get clobbered. It’s ugly out there–unless you’re IBM.
I am sure there will be more write-ups and analyses on this over the next coming weeks, and others will probably waituntil more tech companies announce their results for comparison.