This summary is based on the fourth quarter fiscal 2007 earnings call conducted by International Business Machines Corp. (IBM) on January 17, 2008.
Management:
Vice President, Investor Relations: Patricia Murphy
Chief Financial Officer, Senior Vice President: Mark Loughridge
Key Investors Issues
- EPS from continuing operations were $2.80 a share compared to $2.26 a share last year.
- Net income from continuing operations was $3.95 billion compared to $3.46 billion in the prior-year period.
- Revenue was $28.9 billion compared to $26.26 billion last year.
Fourth Quarter Highlights
The company generated 65% of business outside of the U.S. By capitalizing on the opportunities in the global economies the company delivered 10% revenue growth.
- Performance was especially strong in Asian regions excluding Japan.
- The IBM business model drove 24% earnings per share growth.
Services continued the momentum seen over the year.
- Global Technology Services revenue was up 16%, profit up 26%.
- Global Business Services revenue was up 17%, profit up 9%.
- The company signed $15.4 billion of new business, and importantly short term signings were up 8%.
- In Software, strong execution resulted in good transaction closing rates and revenue growth of 12%.
- In Hardware, taking into account the product transition in System z, the company had good performance in Systems with strong performance in System p and Storage.
- Systems and Technology revenue growth was flat excluding the divested printer business but the real story here is the margin improvement, driving 18% growth in profit.
- The company generated $12.4 billion of free cash flow, up $1.9 billion over 2006 levels. This contributed to a cash balance at the end of the year of $16.1 billion.
Revenue was $28.9 billion, an increase of 10% as reported and 4% at constant currency.
- Gross margin was up four-tenths of a point, driven by improvements in Systems business.
- Expense was up 9%.
- The company maintained focuses on cost and expense management, while continuing to invest for growth in key markets.
- With this operating leverage, both pretax income and net income are up strong 14%, and up 17% excluding the additional interest expense for accelerated share repurchase.
- The company delivered a pretax margin of 19% and net margin of 13.7%, high level of return.
- Share count was down 8%. This reflects almost $19 billion of share repurchase, with the majority coming from accelerated share repurchase in May.
- Bottom line, the company delivered $2.80 of EPS, a growth of 24% year to year.
- Within $14.5 billion of pretax income, the company absorbed about $370 million for the amortization of purchased intangibles. The company absorbed over $700 million of stock-based compensation. The company absorbed about $350 million of charges for ongoing restructuring, primarily reflecting resource rebalancing activity, and it absorbed $2.6 billion of cost and expense for retirement related plans. Together, these four items impacted pretax income by $4 billion.
Growth in Financial Services was 11%, or 5% at constant currency.
- This is consistent with IBM’s total sector performance and also more in line with FSS growth in the first half of the year.
- Similar to last quarter, by brand, the largest impact was in System z worldwide as customers look forward to the new product. So this impact was more a function of the product transition than the sector.
By geography the U.S., which represents about 25% of the total, was flat.
