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This Week in Guadalajara, Mexico
This week I'm in beautiful Guadalajara, Mexico teaching at our[System Storage Portfolio Top Gun class].We have all of our various routes-to-market represented here, including our direct sales force, our technicalteams, our online IBM.COM website sales, as well as IBM Business Partners.Everyone is excited over last week's IBM announcement of [4Q07 and full year 2007 results], which includesdouble-digit growth in our IBM System Storage business, led by sales of our DS8000, SAN Volume Controller and Tapesystems. Obviously, as an IBM employee and stockholder, I am biased, so instead I thought I would provide someexcerpts from other bloggers and journalists.
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.
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.
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.
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.