IBM Q2 Bounces Back

Here are excerpts from the prepared remarks from IBM's conference call with financial analysts yesterday:

REVENUE - BRAND
Total Revenue in the second quarter was down 4 percent year-to-year as reported, but up 6 percent without PC’s. Without PC’s, revenue was up 4 percent at constant currency.

Global Services, which this quarter represented over 50 percent of IBM’s revenue, was up 6 percent year-to-year as reported, and up 4 percent at constant currency. An improvement in short term signings accelerated the growth rate of BCS. Our strategic outsourcing signings were up significantly year-to-year, which will provide a benefit over the longer term.

Hardware revenue was down 25 percent as reported. But, as we just discussed, this included one month of PC’s as compared to three months in second quarter of 2004. Without the PC business, hardware was up 5 percent, and up 4 percent at constant currency.
We had double-digit growth in pSeries, iSeries, xSeries, and storage.
This strong performance was offset by an expected decline in zSeries, as customers anticipated a new product announcement.

Software revenue grew 10 percent as reported, and 7 percent at constant currency.
You’ll recall that the second quarter of 2004 was a challenging environment for the software industry.

This year, we had especially strong performance in the Americas.
Global Financing revenue was down 4 percent as reported, or 7 percent at constant currency, driven by a continued decline in the asset base and yields.

From the press release
Hardware revenues decreased 25 percent (27 percent, adjusting for currency) to $5.6 billion in the second-quarter 2005 versus the year-ago period. Hardware revenues excluding the divested PC business were $5.0 billion, an increase of 5 percent (4 percent, adjusting for currency).

Hardware revenues for the Systems and Technology Group, which was newly realigned to include Retail Stores Solutions and Printing Systems, totaled $4.9 billion for the quarter, up 5 percent. Revenue growth from S&TG eServer products was driven by pSeries UNIX servers, which increased 36 percent, and xSeries servers and iSeries midrange servers, which increased 11 percent and 10 percent, respectively. Revenues from the zSeries mainframe product decreased 24 percent compared with the year-ago period. Total delivery of zSeries computing power, which is measured in MIPS (millions of instructions per second), decreased 19 percent. In addition to eServers, revenues from Storage Systems increased 19 percent and Microelectronics decreased 5 percent.

Revenues from Software were $3.8 billion, an increase of 10 percent (7 percent, adjusting for currency) compared with the second quarter of 2004. Revenues from IBM's middleware brands, which include WebSphere, DB2, Tivoli, Lotus and Rational products, were $3.0 billion, up 11 percent versus the second quarter of 2004. Operating systems revenues increased 3 percent to $592 million compared with the prior-year quarter.