Systems vendor IBM grew both revenue and profit in the third quarter of 2010, but a continual decline in new bookings and mixed performances across business segments cast doubt on the company’s future.
In the three-month period ending 30 September, the US vendor reported a 3% revenue increase to $24.3 billion compared to the year ago quarter. Net income jumped 12% to $3.6 billion.
During the company’s conference call with investment analysts, however, specific concerns were raised over its ability to sign up new customers. "For your last three quarters worth of signings, year-over-year you are down 7%," said Sanford Bernstein financial analyst Toni Sacconaghi. "You have missed your signings estimate effectively for three straight quarters."
CFO Mark Loughridge responded that this decline was caused by a delay in the signing of a major outsourcing services contract, which if completed in time would have pushed new bookings up 14% for the third quarter.
The company’s hardware division saw the strongest revenue growth. This unit’s 10% sales increase to $4.3 billion was driven by a surge in demand for System z and MIPS mainframe technologies, Loughridge said.
But sales stagnated at IBM’s technology services unit, by far its largest. The division’s revenue crept up by just 0.7% year-on-year to $9.5 billion. IBM’s software division posted an equally modest 0.7% inflation to $5.2 billion.
Once again, a steady sales performance in the US (up 3% to $10.2 billion) and sharp growth in developing economies (26%) was counterbalanced by a weak performance in Europe, where revenues dropped 6% to $7.4 billion.
Following the announcement, IBM’s share price fell by approximately 4%. Earlier this month, its share price reached an all time high of $139.94.