IBM earnings

by Volker Weber

Waiting for the spin on these numbers - again :

Revenues from the WebSphere family of software products ... increased 8 percent year over year. ... revenues from Lotus software ... decreased 14 percent.

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What I find more interesting is that last year, software barely eclipsed (pun intended) hardware, but in 2009 hardware took a 26% nose dive while software held its own at a 7.3% decline.

Rob Novak, 2009-07-17

Its prefectly clear that the decrease in Lotus revenue is due to the 25% discount on Notes/Domino renewals.

Colin Williams, 2009-07-17

Well, it's "double-digit growth" certainly: grew by -14% :-|

Julian Woodward, 2009-07-17

Isn't the 25% discount for Asia-Pacific only? Still, that could account for quite a bit.

Erik Brooks, 2009-07-17

@Colin: Are you sure without 25% discount there would be a plus earning?

Peter Gleissner, 2009-07-17

I think there was a price increase compared to last year. The discount is only for new licenses and reinstates, not for renewals afaik. And it does not include server products, Designer and Extranet licensing and all other tools in the IBM Lotus portfolio (like Connections, Forms, Portal).
14% isn't that bad but if it remains like that I fear there will be another round of "resource actions".

Henning Heinz, 2009-07-17

Sorry Volker but this statement seems to be a little bit "biased".

It seems that we have to account for currency exchange rate change. You remember 1,6 USD/EUR.

From a geographic perspective, the Americas' second-quarter revenues were $9.9 billion, a decrease of 9 percent (7 percent, adjusting for currency) from the 2008 period. Revenues from Europe/Middle East/Africa were $7.9 billion, down 20 percent (7 percent, adjusting for currency)"

We know that Lotus is quite strong in EMEA.


Olaf Boerner, 2009-07-17

Yes, we know that. Therefore I have always asked how much of the 10,000 quarters of double-digit growth was caused by currency exchange rate fluctuations, and I have always been told they did not really matter. If we match Dollar against Euro for the last years we get this:

So you may be right, and it's mostly the currency which accounts for Lotus' growth and shrinkage.

Volker Weber, 2009-07-17

Can we conclude by the graph, that the Lotus growth was mostly in the US?

Pedro Quaresma, 2009-07-17

No, you cannot conclude anything. Growth is often financial engineering, not software engineering.

Volker Weber, 2009-07-17

It has to be said that these are very good results for IBM as a whole and ahead of forecasts. The market seems to have reacted well to the news too - outperforming the sector and the Dow.

That said it would appear that cost cutting rather than sales growth (which was lower than expectations) has been a major factor.

Maybe we should wait until we see the software results from other companies before attempting to draw conclusions.

Ian Scott, 2009-07-18

If IBM makes so much money from moving currency among countries, maybe it should just give up and become a bank. Like Goldman-Sachs ($3billion in profit, after making a ton of dough on cheap government loans).

Can IBM in good conscience (or legally) take "stimulus" money while offshoring jobs to China, India and Brazil? Good for the bottom line, certainly, but ethical? One wonders.

Bob Balaban, 2009-07-18

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