This strategy may not have produced the type of rapid growth that Microsoft and Oracle have generated, but it has resulted in a stable revenue base that is capable of carrying the company through difficult periods. IBM software continues to produce strong revenue and profit growth, but the segment is experiencing changes in the nature of its business due to the worsening financial environment.
Loughridge reported during the 3Q08 earnings call that the focus of software investments during the quarter was primarily on projects delivering short-term returns, versus longer-range projects.
Bigger boxes tend to get virtualized first, so you would expect IBM, with its large enterprise focus across most of its servers, to get hit by the uptake of server virtualization sooner than Dell or HP, which have large businesses selling small machines to SMB shops as well as selling some big iron. Global Technology Services fell by 3. However, IBM was able to boost gross margins on services by nearly 5 points, and that made a huge difference in the bottom line in Q4.
By comparison, gross margins in the Systems and Technology Group fell by nearly 6 points, meaning it cut into profits. As it is, the two are close enough in age that this will probably not happen, unless IBM bucks tradition when Palmisano retires at age That kind of growth rate in this kind of economy for these kinds of products is impressive.
The question now: is this sustainable or a one quarter push? But databases brought up the class average for key branded middleware so they, as a group, showed a 6 percent increase in sales. Operating system and other software sales declined by about 1 percent by my math, which stands to reason given the decline in mainframe sales and the possible decline in Power System i sales.
By geography, sales in the fourth quarter in the Americas fell 2 percent as reported, but were up 2 percent at constant currency. Gotta love Brazil and Canada, man. You can see how the strengthening of the U. But, this is just the flip side of a weak dollar, which for years has made IBM look stronger than it really was.
IBM is set to split into two companies by the end of Holding such strong positions in its core strategic areas gives IBM a reasonably good chance of successfully turning itself around and returning to growth in the years ahead. In terms of recession performance, IBM receives mixed reviews. As a global technology company, IBM is exposed to the fluctuations of the broader economy. It is quite impressive that IBM was able to grow its earnings-per-share in each year of the Great Recession.
Moreover, the dividend kept increasing as well. IBM shares look attractive on a valuation basis, as the stock trades for a price-to-earnings ratio of Investors should also keep in mind that EPS is coming off a low base from The impact of a declining valuation multiple could reduce annual returns by 4.
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