IBM comfortably met analysts' earnings expectations for its second quarter but fell slightly short on revenue, suggesting that it, too, is feeling the effects of postponed spending.
After a rash of earnings warnings from software vendors, investors were looking to Big Blue for reassurance about the sector's strength -- but while IBM's hardware and services businesses grew, its software group's revenue was essentially flat from last year, the company announced Thursday.
IBM reported per-share earnings of US$1.16, higher than the US$1.12 consensus forecast of analysts polled by Thomson First Call. Net income was US$2 billion, up 17 percent from last year's second quarter. Revenue for the quarter was US$23.2 billion, up 7 percent year-over-year but below the US$23.4 billion analysts expected.
IBM's Global Services unit remained its revenue leader, generating US$11.3 billion during the quarter, up 7 percent from 2003. IBM's restructuring in its hardware operations paid off, with 12 percent growth in revenue, to US$7.4 billion. Its Personal Systems Group, which includes its PC manufacturing, turned the corner into the black, with net income of US$27 million.
IBM's software group, however, stalled, posting a 0.4 percent revenue decline in the quarter, to US$3.5 billion. For the first six months of the year, the group is 5 percent ahead of last year's revenue.