How to read quarterly reports

by Volker Weber

If you read that a business lost 10% revenue four quarters in a row, what is the total loss for the year? Hint: it's not minus 40%, nor minus 34.39% for those better at math. It's minus 10%. Why? Each quarter is measured year over year, against the same quarter of last year. Since each quarter lost 10% over last year's quarter, the total revenue for that year also lost only 10%.

What does that mean for the Lotus numbers*? I have set up a little table with the numbers readily available by going to http://www.ibm.com/investor/3q12/press.phtml and then replacing the year and quarter. 2009 is the earliest full year on that pattern.

I am setting 2008 as 100%. The quarters do not have equal revenue as you might imagine, but the table still helps to understand how the mechanics work. The second quarter is the one with the most up and downs, the fourth quarter is very steady. You may find your own explanation. Mine is that in the fourth quarter you are trying to reel in whatever you can to meet your target.

Overall, Lotus is losing revenue, but not as much as you may have thought.

*) This is ceteris paribus. It does not account for currency changes, nor does it account for a changing set of product revenues consolidated under one brand. It's only based on the press reports.

Comments

Very interesting!
I never thought of it that way, but math was of course never my strongest subject in school. :-) Very nice overview, and a good explanation.

Karl-Henry Martinsson, 2012-10-17 16:22

Die Zahlen sind für sich gesehen nicht so schlecht. Ich hätte spontan auch einen anderen Wert seit 2008 geschätzt.
Für die Performance einer Sparte sind diese Zahlen aber nur bedingt aussagefähig.
Dazu müsste man berücksichtigen wie sich unter anderem der Gesamtmarkt und die direkten Konkurrenten über diesen Zeitraum entwickelt haben.
Außerdem gab es seit 2008, teilweise massive, Preiserhöhungen in der Lotus Produktlinie.
Mit Connections hat die IBM ein Produkt im Portfolio, welches bei Großkunden signifikante (Neu)Umsätze erzielen dürfte.
Zumindest für die Produktgruppe, für die ich mich persönlich interessiere, stellt sich die Situation nicht ganz so rosig dar. Das von Dir ins Leben gerufene Wiki untermauert das auch recht deutlich. Auch bei Betrachtung der DAX Unternehmen ist ein Trend deutlich erkennbar.
Unternehmen machen (subjektiv betrachtet) nach einer Migration vieles anders aber selten etwas wirklich besser. Sie erkaufen sich allerdings oft eine höhere Mitarbeiterzufriedenheit. Dieser Punkt ist lange Jahre unterschätzt worden.
Danke für die aufschlussreichen Zahlen (und den Wiki).

Henning Heinz, 2012-10-18 10:37

Es geht mir nicht darum, die Entwicklung von Lotus zu dokumentieren. Ich will nur erklären, wie man diese Quartalsergebnisse liest.

Volker Weber, 2012-10-18 10:41

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I explain difficult concepts in simple ways. For free, and for money. Clue procurement and bullshit detection.

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