Falling Euro caps IBM growth

Global IT and services giant IBM has been seriously impacted by the declining value of the Euro against the dollar, the company revealed as it reported results its second quarter of the financial year.

IBM’s revenue for the three months ending June 30 2010 was $23.7 billion, up just 2% from last year. By contrast, many large IT companies including HP and Oracle have enjoyed double-digit revenue growth rates in recent months.

“This quarter we dealt with the sharp strengthening of the dollar versus the Euro,” said IBM’s CFO Mark Loughridge in a statement. “The currency movements since April impacted second quarter revenue by about $500 million.  And if you consider the currency movements since mid-January, second quarter revenue was impacted by $1 billion.”

The real impact of currency fluctuations on IBM’s business depends on how it choses to use the money – for example, if it decides to spend its Euros within the Eurozone, the impact could be minimal.

More troubling in the longer term could be the news that the value of new services contracts signed during the quarter was, at $12.3 billion, down 12% from the same quarter of last year. The sharpest decrease was in new outsourcing deals, which fell 19% to $6.5 billion.  

So far this financial year, IBM has derived as much revenue from ‘growth markets’ such as Brazil, Russia, India and China as it has from the Eurozone. Indeed, BRIC revenue grew 22% in the second quarter.  Among the ‘major markets’, the company’s fastest growing region by revenue was the UK, “which was up a very strong 11 percent”, Loughridge said.

IBM was stronger in profit than in revenue during the quarter; its net income rose 9% to $3.4 billion, and its earnings per share rose for the 30th financial quarter in a row.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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