IBM's Mixed Q3 Revenue Picture: System z Revenues Down, Software Sales Up

IBM had mixed news for the most recent earnings quarter-some segments were down, and others keep growing. Overall, the company grew slightly from last quarter, but was down from a year ago. Total revenues for the third quarter of 2009 were $23.6 billion, up a percent from the second quarter of 2009, and down 7% from the third quarter of 2008.

Revenues from the Systems and Technology segment totaled $3.9 billion for the quarter, down 12% from the third quarter of 2008-but an improvement in the year-to-year revenue growth rate compared with the second quarter of 2009. Systems revenues decreased 13% overall.

However, mainframe sales-strong until recently-slipped in the most recent quarter, IBM says. Revenues from System z mainframe server products decreased 26% compared with the year-ago period. Total delivery of System z computing power, which is measured in MIPS (millions of instructions per second), decreased 20%.

System x boxes were the strongest platform this past quarter. Revenues from System x servers increased 1% over the same quarter last year. Revenues from converged System p products decreased 10%.

While revenues from system storage decreased 13%, IBM says this line has strengthened. The company says it gained market share in System p, System x and disk and tape storage during the third quarter. Overall, the company says it expects full-year 2009 pre-tax income for both its software and services segments to grow at double-digit rates and reach approximately $8 billion.

Total Global Services revenues decreased 7%; pre-tax income increased 11%. Global Technology Services segment revenues decreased 4% to $9.4 billion, while the Global Business Services segment revenues decreased 11% to $4.3 billion. IBM signed services contracts totaling $11.8 billion, at actual rates, a decrease of 7%, including 13 contracts greater than $100 million. In addition, IBM signed three deals in the first two days of October with a total value of nearly $1 billion.

Signings in Consulting and Systems Integration and in Integrated Technology Services were $5.1 billion, a decrease of 16%. Total outsourcing signings increased 1% to $6.7 billion. The estimated services backlog at September 30 was $134 billion at actual rates compared with $132 billion at June 30, 2009, and compared with $129 billion in the third quarter of 2008.

Revenues from the Software segment were $5.1 billion, a decrease of 3% compared with the third quarter of 2008. Revenues from IBM's key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $2.9 billion, an increase of 2% versus the third quarter of 2008. Operating systems revenues of $521 million decreased 12% compared with the prior-year quarter.

Revenues from the WebSphere family of software products increased 14% year over year. Revenues from Information Management software were flat. Revenues from Tivoli software increased 5%, and revenues from Lotus software decreased 9%. Revenues from Rational software increased 2%. IBM also says it gained market share in WebSphere, Information Management, Tivoli and Rational software during the third quarter.

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