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IBM reports 30th consecutive quarter of earnings gains but tepid sales growth; Amazon.com sold more e-books than hardbacks in Q 2 2010
By Finfacts Team
Jul 20, 2010 - 6:42:15 AM
On Monday, IBM reported
its 30th consecutive quarter of earnings per share
gains, but sales growth was tepid, hit by currency
issues and a drop in contract signings in its
outsourcing division. Meanwhile, Amazon.com said it
sold more e-books than hardbacks over the second
quarter.
IBM
reported a quarterly profit of $3.39bn, or $2.61 a
share, up 9.1% from a year earlier. Revenue rose 2%
to $23.72bn but above analysts' expectations. IBM
said the decline in contract signings was caused by
customers who failed to extend contracts that came
up for renewal. CFO Mark Loughridge said the company
did a good job of signing up new customers, which
would boost revenue in the months ahead.
From a geographic
perspective, the Americas’ second-quarter revenues
were $10.2bn, an increase of 3% (2%, adjusting for
currency) from the 2009 period. Revenues from
Europe/Middle East/Africa were $7.4bn, down 6% (1%,
adjusting for currency). Asia-Pacific revenues
increased 9% (3%, adjusting for currency) to $5.4bn.
OEM (original equipment manufacturer) revenues were
$677m, up 26% compared with the 2009 second quarter. Total Outsourcing
services (GTS Outsourcing and Application Management
Outsourcing) signings decreased 19% (also 19%
adjusting for currency) to $6.5bn.
“In the
second quarter we again
delivered double-digit
earnings-per-share
growth, increased
margins, as well as
improving
constant-currency
revenue performance in
our ongoing software,
services and hardware
businesses, and in all
geographies,”
said Samuel J. Palmisano,
IBM chairman, president
and chief executive
officer. “With
the benefit of our
strategic growth
investments, our mix of
higher-value business
and the introduction of
new System z and Power
Systems, we are
confident of our ability
in the second half of
the year to continue our
strong business
performance, grow profit
and drive shareholder
returns. As a result, we
expect full-year 2010
diluted earnings per
share of at least
$11.25.”
Parsing the tech
giant's second quarter results with Louis Miscioscia, a tech analyst at Collins
Stewart:
Amazon.com
Over the past three months, for every 100
hardcover books Amazon.com has sold, it has sold 143 Kindle books. Over the past
month, for every 100 hardcover books Amazon.com has sold, it has sold 180 Kindle
books. This is across Amazon.com's entire US book business and includes sales of
hardcover books where there is no Kindle edition. Free Kindle books are excluded
and if included would make the number even higher.
Amazon sold more than 3 times as many Kindle
books in the first half of 2010 as in the first half of 2009.
"We've reached a tipping point with the
new price of Kindle--the growth rate of Kindle device unit sales has tripled
since we lowered the price from $259 to $189," said
Jeff Bezos, Founder and CEO of Amazon.com. "In
addition, even while our hardcover sales continue to grow, the Kindle format has
now overtaken the hardcover format. Amazon.com customers now purchase more
Kindle books than hardcover books -- astonishing when you consider that we've
been selling hardcover books for 15 years, and Kindle books for 33 months."
Bezos said Kindle offers the largest selection of
the most popular books people want to read. The US Kindle Store now has more
than 630,000 books, including new releases and 106 of 110 New York Times
Best Sellers. Over 510,000 of these books are $9.99 or less, including 75 New
York Times Best Sellers. Over 1.8 million free, out-of-copyright, pre-1923
books are also available to read on Kindle.
Amazon said its hardback book unit sales also
continued to rise. While Amazon has become one of the largest booksellers in the
US, it still attracts an online audience that is more likely to be early
adopters of new reading technology.
The success of Apple's iPad is
triggering a price war in e-readers, reports CNBC's Dennis Kneale:
