IBM Q2 Revenue, Earnings Slide, Key Segments Grow

IBM (IBM) recorded $24.9 billion in sales for Q2 2013, a 3 percent year-over-year slide and less than analysts’ $25.4 billion forecast, and took in $3.2 billion ($2.91 per share), a 17 percent tumble from the same period last year. That number factored in a $1 billion charge the vendor took for layoffs it began in June.

The number that stuck out for the period, however, was IBM’s operating earnings, which climbed to $4.3 billion, or $3.91 a share, a 3 percent uptick and well above analysts’ projections of $3.77 a share. The number didn’t include the workforce reduction charge.

The earnings increase may have been behind the stock’s 70 cents-per-share rise to close the trading day at $194.55 and another 2.6 percent added on in after-hours trading.

In its below-par Q1 2013 performance, IBM showed vulnerability to a listless economy and a reluctant hardware market, factors that continued to plague the vendor in Q2. While sales in key segments of its business such as its software, business analytics and cloud revenue rose encouragingly, its old-line systems and technology business still suffered.

Key results include:

Rising

Flat or declining

IBM chief Ginny Rometty’s public response to the vendor’s Q2 performance was much the same as her Q1 reaction, as she vowed to emphasize its strong areas and fix its weaker ones.

“Going forward, we will continue investing in our strategic growth initiatives, acquiring and divesting capabilities, rebalancing skills and taking action in the areas that are not performing,” she said.

In the wake of its poor Q1 results—when the vendor recorded revenue of $23.4 billion, down 5 percent from last year, and a 1 percent slide in net income to $3 billion or $3 per share—Rometty responded to a 17 percent downturn in hardware sales by assigning a new head of IBM’s Systems and Technology group, moving out Rod Atkins and moving in former corporate strategy senior vice president Tom Rosamilia, and issuing layoffs to some 1,700 employees, a figure that eventually could go as high as 8,000.

In addition, she called an all-hands-on deck meeting in which she chastised the company’s rank and file to “step up” and do better.

So far, this time around there’s been none of that. In fact, IBM buoyed analysts’ expectations by raising guidance for earnings per share for the year $16.90 a share.

“We expect continued improvement through the second half of the year and remain confident that we will achieve our increased 2013 operating EPS expectation of at least $16.90, excluding the $1 billion workforce rebalancing charge in the second quarter,” Rometty said.