Financial results

At the top of the pile in overall earnings for 2005, and still towering over its rivals, is IBM. At one point last year it looked like being the first ever technology company to pass the $100 billion revenue mark, but the sale of its $12 billion PC division to Lenovo in April meant it finished 2005 with revenues of $88.3 billion, up 3% over 2004.

The impact of the PC sell-off was evident in the company’s final quarter. Revenues for the three months were down by 12% to $24.4 billion. However, if the loss-making PC business is excluded and the influence of currency fluctuations eliminated then revenues were actually up 3%. Analysts suggest that in spite of the sales downturn in absolute terms, smaller is better at IBM, pointing to a jump of almost 3% in net margin to 13.2%.

The fourth quarter was a mixed bag for IBM. Revenues from its Global Services division – often regarded as the company’s star performer – decreased 5% to $12.0 billion; hardware revenues tumbled 27% to $6.9 billion, although without the PC element the increase would have been closer to 6%; and revenues from software remained flat at $4.6 billion.

IBM Global Services, in particular, came under scrutiny from analysts. IBM watcher Bob Djurdjevic indicates that a $2 billion backlog in the fourth quarter and a 9% decline in new contract signings mean IBM’s biggest unit is losing more business from its backlog than it is signing.

Euro mammoth

Unlike IBM, Europe’s biggest IT company, SAP, passed its own revenue milestone – and looked considerably healthier along the way.

For the year to 31 December 2005, the market leader in business applications software crossed the $10 billion line as revenues surged 13% to e8.5 billion ($10.2 billion). That was aided by a blockbuster fourth quarter in which revenues rose 15% to e2.9 billion ($3.3 billion).

Notwithstanding the maturity of its software franchise within big business, SAP is still chalking up impressive software sales – even in traditional markets. Fourth quarter sales at SAP Americas jumped 34% to e425 million ($510 million). Strong European sales, most notably in Russia, France and Switzerland, were also reported. But they were not enough to lift software revenue for the EMEA region into double digits, where licence sales increased 8% to e626 million ($751 million). Overall software sales were up 18% to e1.2 billion ($2.2 billion).


But the focus of that demand varied widely. ERP sales for the full year were up 17% to e1.2 billion ($1.9 billion), accounting for 42% of total software revenues while customer relationship management (CRM) software sales rose 20% to e602 million ($722 million) to become the company’s second biggest revenue stream with 22% of the overall software base. CRM overtook SAP’s supply chain management category, where sales were up a less spectacular 6% to e510 million ($612 million). However, the big growth area for the company was in middleware: sales of NetWeaver and related products jumped 132% to e176 million ($211 million).

But SAP is not resting on its laurels. Chief executive officer Henning Kagermann has announced that it is launching a much anticipated hosted CRM application service in February.

Disk drive

Storage and document systems vendor EMC also closed the year on a high. Strong demand for its midrange storage systems as well as resource and content management software during the fourth quarter helped pushed overall revenue up 15% to $2.7 billion. That brought the full year total to $9.7 billion, a 17% rise.

Sales of EMC’s Clarion midrange systems leapt 32% to $518.7 million in the quarter, fast catching the company’s high-end Symmetrix line, where revenues were flat at $754.3 million.

The software story was more complex. Software licences for its storage platforms were up 5% to $333.4 million; storage resource management software was up 7% to $167.4 million; and back-up and archiving software sales rose 13% to $60 million.

Outside storage, where EMC has made some key acquisitions, the picture was even more interesting. Content management software sales (through its Documentum unit) were up 25% in the quarter to $64.4 million, while the company’s virtualisation software unit, VMware, recorded a quarterly total of $115.2 million, up 44%, and taking its annual revenues to $387.5 million.

Like EMC, US-headquartered microprocessor manufacturer Intel did well during 2005. The company recorded total annual revenue up 13.5% to $38.8 billion. However, revenue for the last three months ending 31 December was lower than expected, rising a more modest 6% to $10.2 billion, due largely to a fall in desktop processor unit shipments and prices. The drop in demand for desktop products among OEM customers was most stark in the Americas region, with quarterly revenue dropping 10% to $1.8 billion compared to the same period last year.

However, Intel will be hopeful of a boosting its revenue in 2006 with the release of its newest chip, the Core Duo, which will be used in Apple’s new iMac desktops. And despite dropping its ubiquitous ‘Intel Inside’ brand recently, there are no plans to retire the Pentium brand – yet.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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