International Business Machines Corporation (
IBM)
Q2 2009 Earnings Call Transcript
July 16, 2009 4:30 p.m. ET
Executives
Patricia Murphy - Vice President of Investor Relations
Mark Loughridge - Senior Vice President & Chief Financial Officer
Analysts
Toni Sacconaghi - Sanford C. Bernstein & Co.
Richard Gardner - Citigroup
Chris Whitmore - Deutsche Bank
Benjamin Reitzes - Barclays Capital
David Bailey - Goldman Sachs
Keith Bachman - BMO Capital Markets
Mark Moskowitz – JPMorgan
Bill Shope - Credit Suisse
Scott Craig – Bank of America/Merrill Lynch
David Grossman - Thomas Weisel Partners
Presentation
Operator
Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. Today’s conference is being recorded. If you have any objections, you may disconnect at this time. Now I would like to turn the meeting over to Ms. Patricia Murphy, Vice President of Investor Relations. Ma’am, you may begin.
Patricia Murphy
Thank you. This is Patricia Murphy, Vice President of Investor Relations for IBM. I’m here with Mark Loughridge, IBM’s Senior Vice President and Chief Financial Officer. Thank you for joining our second quarter earnings presentation.
The prepared remarks will be available in roughly an hour, and a replay of this webcast will be posted to our Investor Relations website by this time tomorrow.
Our presentation includes certain non-GAAP financial measures, in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. You will find reconciliation charts at the end, and in the Form 8-K submitted to the SEC.
Let me remind you that certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the company’s filings with the SEC. Copies are available from the SEC, from the IBM website, or from us in Investor Relations.
Now, I’ll turn the call over to Mark Loughridge.
Mark Loughridge
Thank you for joining us today. This quarter we delivered $2.32 of earnings per share, up 18% year to year. This is a record level of EPS for a first, second or third quarter, adjusting for stock splits. We generated over $4 billion of cash from operations, and ended the quarter with $12.5 billion of cash on hand. And we returned another $2.4 billion to shareholders, with $700 million in dividends and $1.7 billion of share repurchases.
With this powerful performance, we now expect to generate at least $9.70 of earnings per share for the year, up $0.50 from our previous view of at least $9.20.
This is the result of the strategic transformation of our business. Our ongoing shift to higher value areas has positioned us to better meet clients’ needs. This quarter, our strategic outsourcing signings were up 38% at constant currency, and our key branded middleware revenue, now 58% of software, grew 5% at constant currency.
Our strategic acquisitions continue to contribute to our higher value capabilities. This quarter Cognos, Telelogic, ILOG and storage solutions XIV and Diligent all showed very strong results.
But as you will see, margins are fueling our profit growth. I’ll discuss how our transformation is driving this but it is the shift to higher value, globally integrating our business, and our ongoing productivity initiatives that led to significant margin improvement. We expanded our pre-tax margin by 4 points. That’s our best margin improvement in almost four years, when we divested our PC business.
