Despite meeting or just exceeding published forecasts for its business in Q3, it wasn’t enough for investors, which brought IBM’s share price down by 3.7% yesterday. There are numerous theories floating around for the share price drop – profit-taking, higher underlying expectations, and a slowdown in key markets. It’s the latter which interests us most.
While overall revenues were up 8% to £26.2 billion, that was just 3% at constant currency. The low single-digit growth was made possible by “growth markets”, which now account for 23% of IBM’s revenues, and saw revenues increase by 19%; the BRIC regions (Brazil, Russia, India, and China) saw revenues increase by 13%. Which means there’s very little to shout about in the key regions: Indeed, EMEA revenues were flat (constant currency) and Asia Pacific revenues were up just 1% (ccy). In the US, revenues grew 6%, but even that represented a slow-down (constant currency growth was 8% in Q2).
With services revenue growth at just 2% globally (ccy), one can only assume that outside of the emerging markets, the main geographies suffered declines. The good news from services is that pre-tax margins improved for both Global Business Services (standing at 15.4%) and Global Technology Services (15.9%). The Services ‘backlog’ also continued to head in the right direction – up $2.4 billion year-on-year.
Software growth stood at 8% (ccy) with growth in middleware up 12% and operating systems up 4%. The big growth stories, though, were in “growth initiatives”: business analytics (up 19%), ‘smarter planet’ (up 50%) and cloud (which IBM states, based on year-to-date revenues, has already doubled 2010 full year results).