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IBM Sells Off in Afterhours Trading Following Q1 2010 Earnings

April 19, 2010 By Chuck

Today’s leader in the Dow 30 was IBM. Tomorrow it could be the biggest loser.

IBM announced Q1 2010 earnings after the markets closed this afternoon.

International Business Machines Corp Reports Q1 $1.97 v $1.93e, R$22.9B v $22.8Be

- Guides FY10 EPS at least $11.20 v $11.12e
- Q1 gross margin 43.6% v 48.3% q/q, v 43.4% y/y
- Q1 global business services gross margin: 27.3% v 26.5% y/y
- Q1 software gross margin: 84.6% v 84.2% y/y
- Q1 global services revenue +4% y/y
- Q1 software revenue +11% (+5% adjusting for currency) to $5B
- Q1 Americas revenue +2% (flat adjusting for currency) to $9.5B
- Q1 Websphere revenue +13% y/y
- Q1 services backlog +6.3% y/y and -2.2% q/q to $134B

Looks great, on the surface that is. The problem is, and why IBM is selling down in after hours, is that the gross margins are contracting and the services backlog actually declined from last quarter and American revenue show flat to little growth.

Backlog is essentially “booked business”. If a companies backlog of work declines than it means that future revenues will be lower as there is less work in the pipeline. And it is the services division that is a big revenue source for IBM.

It is very interesting how IBM can raise forward guidance, albeit slightly, with a drop in q/q backlog.

With the drop in gross margins, this suggests that IBM is sacrificing profit in order meet the numbers. A little like stretching the soup by adding more water.

As stated above, the after hours reaction to IBM’s earnings is poor.

IBM Stock chart

Unless IBM says something in the conference call that is very bullish, the action in the afterhours trading suggest further weakness for IBM ahead.

Filed Under: Charts, earnings Tagged With:

IBM Employees On Edge – More Layoffs?

March 1, 2010 By Chuck

The ‘inside’ rumor mill at IBM has the company on the precipice of announcing layoffs at Big Blue.

According the web site Alliance at IBM, employees at the Research Triangle Park facility in Raleigh, NC would likely be impacted. Although the site does mention other sites as well that might be in line for what IBM calls a ‘resource action’.

[…] IBM wouldn’t discuss the reports.

“As you know, we don’t comment on speculation and rumor,” IBM’s Doug Shelton said when contacted by Local Tech Wire and WRAL.com.

Employees at a WebSphere development and support lab in Silicon Valley have reported a “big RA” is expected there with an “estimated 40-50%” of the staff to be “RA’d” on Monday, according to a post on the Alliance@IBM Web site. The Alliance is the union affiliate that is seeking to represent IBM workers.

Other posts at the Alliance site comments section (Read the comments section here) indicate that workers in the IBM Systems and Technology Group and the Integrated Technology Delivery groups could be affected.

The increasing number of posts and other information funneled to the Web site led the Alliance to issue an alert to selected media outlets on Saturday morning.

“The Alliance@IBM is getting reports of a job cut/resource action for Monday March 1st,” wrote Alliance National Coordinator Lee Conrad.

“We always expect cuts,” Conrad told Local Tech Wire and WRAL.com. “It is the date that is the guessing game.”

Other workers in Australia, New Zealand and the United Kingdom are already being affected.[…] (Source: WRAL)

That seems to be the new normal these days, need to increase margins? Layoff more and more workers. They have to keep those shareholders happy you know.

Filed Under: Market Updates Tagged With: , ,

IBM Slashes An Additional 5,000 Jobs – Moves Work To India

March 25, 2009 By Chuck

From WSJ:

International Business Machines Corp. plans to lay off about 5,000 U.S. employees, with many of the jobs being transferred to India, according to people familiar with the situation.

The technology giant has been steadily building its work force in India and other locations while reducing the number of workers based in the U.S. Foreign workers accounted for 71% of Big Blue’s nearly 400,000 employees at the start of the year, up from about 65% in 2006.[...]

[...]In January, IBM sent layoff notices to about 4,600 people, including workers in its software unit and sales department.[...]

Earlier this year, IBM also told employees that if they wanted to move to an emerging market [India], they could apply for jobs there with IBM, but they would be paid in local wages.[...]

Filed Under: Market Updates Tagged With: ,