IBM Q4 net income rises nine per cent

Growth markets and software drive up the company's profits

IBM said Tuesday that net income for the fourth quarter ended Dec. 31 rose nine per cent to $US5.3 billion year over year, helped by strong performance in growth markets as well as software and mainframe sales. Revenue for the quarter was $29 billion, a seven per cent increase.

Full-year net income grew 10 per cent to $14.8 billion, while full-year revenue jumped four per cent to $99.9 billion.

"We completed an outstanding year, with record profit and free cash flow, and exceeded the high end of our 2010 earnings per share roadmap objective," said IBM CEO Samuel J. Palmisano in a statement. "We also capped a decade in which our shift to high-value businesses, our global integration of IBM, our investment in research and development of almost $60 billion and our acquisition of 116 companies have helped us to nearly triple our EPS and return more than $100 billion to shareholders."

Fourth-quarter revenue grew nine per cent in the Americas to $12.2 billion, but fell two per cent in Europe, the Middle East and Africa to $9.5 billion. Revenue in the Asia-Pacific region climbed 14 per cent to $6.6 billion.

IBM saw strong growth in emerging markets. Revenue from the BRIC countries -- Brazil, Russia, India and China -- increased 19 per cent, while 50 other countries produced double-digit revenue growth, IBM said.

Software sales in the quarter increased by seven per cent to $7.0 billion. Within that segment, WebSphere middleware sales were up 32 per cent, but Lotus software sales dropped three per cent, suggesting IBM is having trouble against competing collaboration software from the likes of Microsoft.

Business analytics-related revenue remained strong, growing 19 per cent across both software and services, IBM said. IBM's recently acquired Netezza data-warehousing technology, which competes with Oracle's Exadata machines, "got off to a strong start this quarter," Chief Financial Officer Mark Loughridge said during a conference call.

Systems and Technology revenue totaled $6.3 billion, up 21 per cent, spurred in part by strong System z mainframe server sales, which jumped 69 per cent year over year. IBM launched a new System z product last year. System x sales were up 18 per cent, while Power Systems revenue grew two per cent.

Global technology services grew one per cent to $10.2 billion, while global business services grew four per cent to $4.8 billion, IBM said. The company signed services contracts in the fourth quarter worth $22.1 billion, a rise of 18 per cent.

IBM doesn't see the fourth quarter as an anomaly and expects the first quarter to once again be driven by hardware and software sales, Loughridge said.

Services revenue is expected to pick up momentum thanks to a growing backlog of service engagements, he added.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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