IBM's Q3 net income falls; revenue remains flat

IBM's net income fell and revenue stayed flat in its third quarter, during which it shed money-losing divisions, trimmed staff and took advantage of the weak economy to buy companies including PwC Consulting.

IBM's net income for the quarter was US$1.3 billion, or $0.76 per share, down from its $1.6 billion net income, or $0.90 per share, in last year's third quarter. Its total revenue for the quarter was $20.3 billion, down 1 percent year-over-year.

IBM's Global Services division posted 2 percent revenue growth, to $8.9 billion, in the third quarter, ended Sept. 30. IBM completed on Oct. 1 its $3.5 billion purchase of PwC Consulting, which brings 30,000 new employees into IBM's newly created Business Consulting Services group. IBM's Global Services unit has been particularly hard hit by layoffs this year: In an August regulatory filing, IBM disclosed that it had pink-slipped more than 15,000 employees this year, the vast majority of them in its Global Services unit.

Software revenue dropped 3 percent year-over-year, to $3.1 billion. Revenue from IBM's DB2 database software grew 2 percent and revenue from its WebSphere portfolio grew 27 percent; declining revenue from its Tivoli and Lotus units, and from operating system software, dragged down the software group's performance, IBM said.

Hardware revenue from continuing operations extended its downward trend, dropping 1 percent to $6.8 billion. PC revenue continued dropping but at a slower pace, while the iSeries server line had a "difficult" quarter, IBM said. Year-over-year revenue from storage and the eServers line, the pSeries Unix servers line and the xSeries Intel servers line grew, the company said.

IBM recently sold its hard disk drive business to Hitachi Ltd. for $2 billion. IBM recorded a $140 million pre-tax loss for the quarter related to the sale, and a total loss of $381 million from discontinued operations.

Excluding discontinued operations, third-quarter income was US$1.7 billion, the same total generated in the year-ago quarter, and revenue was also flat, at $19.8 billion. Earning per share excluding discontinued operations came in at $0.99, topping the $0.96 consensus estimate of analysts polled by Thomson Financial/First Call, which was based on results excluding discontinued operations.

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