IBM feels good, if not 'Sun-ny,' about the months ahead
Here's something unusual: A company that actually wants to talk turkey about its financial outlook for the next year or so. That would be IBM, which brought forth on Monday a slightly softer than expected revenue report for Q1, but which is confident of returns of "at least $9.20" for the 2009 fiscal year and between $10 and $11 EPS -- at least -- for 2010.
Earnings per share for Q1 2009 work out to $1.70.
Yeah, great. Your reporter's with the Barclay's analyst who couldn't believe it took four whole questions into the Q&A to ask what the heck happened with IBM failing to acquire Sun and What It All Means. CFO Mark Loughridge took that inevitable query with a shrug: "Oracle and Sun have been partnering for two decades, and what's the result? The result is that we've picked up 14 points of [market] share since 2000. We now have 32 points... What's really changed? I think nothing. They have the same address, they have the same mailbox, but we're talking about the same team we've been competing against for some time." Meow, sir.
Q1 earnings weighed in at $2.3 billion, down one percent year-to-year. That's not terribly disconcerting in this climate; the revenue drop -- down 11% to $21.71 billion, or 4% if you account for that pesky strong US dollar -- is wince-inducing. Failing to meet Street expectations in most categories isn't something to write home about, but there was plenty of good-looking stuff in the report for those thinking past immediate circumstances.
Gross margins were in a full percentage point above expectations at 43.4%. The $10-$11 forecast beats analyst estimates for FY2010 of $9.78, but Loughridge says the company's outpacing even its own higher guidance. Debt's down nearly $3 billion, to $31 billion. And, as some analysts have already noted, these days when a revenue drop is smaller than expected, it's considered a pretty good sign. The patient isn't fully recuperated yet, but sitting up and sipping broth beats the heck out of coma.
Loughridge ended the call briskly: "We hope to see you at our May investor meeting, but for now, as always, it's back to work." And so it was for the after-hours traders, who sent IBM down 1.87% in after-hours trading to $98.55, from its close at $100.43.