IBM has announced fourth-quarter 2013 diluted earnings of $5,73 per share, compared with diluted earnings of $5,13 per share in the fourth quarter of 2012, an increase of 12%. Operating (non-GAAP) diluted earnings were $6,13 per share, compared with operating diluted earnings of $5,39 per share in the fourth quarter of 2012, an increase of 14%.
Fourth-quarter net income, which includes benefits from tax audit settlements, was $6,2-billion compared with $5,8-billion in the fourth quarter of 2012, an increase of 6%. Operating (non-GAAP) net income was $6,6-billion compared with $6,1-billion in the fourth quarter of 2012, an increase of 8%.
“We continued to drive strong results across much of our portfolio and again grew earnings per share in 2013. While we made solid progress in businesses that are powering our future, in view of the company’s overall full year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013,” says Ginni Rometty, IBM chairman, president and CEO.
”As we enter 2014, we will continue to transform our business and invest aggressively in the areas that will drive growth and higher value. We remain on track toward our 2015 roadmap for operating EPS of at least $20, a step in our long-term strategy of industry leadership and continuous transformation.”
Fourth-quarter operating (non-GAAP) diluted earnings exclude $0,40 per share of net charges: $0,25 per share for the amortisation of purchased intangible assets and other acquisition-related charges, and $0,15 per share for retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.
IBM said that it expects to deliver full-year 2014 GAAP earnings per share of at least $170; and operating (non-GAAP) earnings per share of at least $180. The 2014 operating (non-GAAP) earnings exclude $10 per share of charges for amortisation of purchased intangible assets, other acquisition-related charges, and retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.
Revenues from the Software segment were $8,1-billion, an increase of 3% (up 4%, adjusting for currency) from the fourth quarter of 2012. Software pre-tax income of $4,2-billion increased 6% year over year.
Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Social Workforce Solutions and Rational products, were $5,8-billion, an increase of 5% (up 6%, adjusting for currency) versus the fourth quarter of 2012. Operating systems revenues of $687-million were down 3% (down 2%, adjusting for currency) compared with the prior-year quarter.
Revenues from the WebSphere family of software products increased 14% year over year. Information Management software revenues increased 5%. Revenues from Tivoli software increased 1%. Revenues from Social Workforce Solutions increased 2%, and Rational software was flat.
Global Technology Services segment revenues decreased 4% (down 1% adjusting for currency) to $9,9-billion, from the fourth quarter of 2012. Global Business Services segment revenues were up 1% (up 4%, adjusting for currency) to $4,7-billion.
Pre-tax income from Global Technology Services decreased 2%; pre-tax margin increased to 19,5%. Global Business Services pre-tax income increased 12%; pre-tax margin increased to 19,1%.
The estimated services backlog at December 31 was $143-billion, up 2% (up 5%, adjusting for currency).
Global Financing segment revenues were flat (up 3%, adjusting for currency) in the fourth quarter at $534-million . Pre-tax income for the segment increased 14% to $589-million .
Revenues from the Systems and Technology segment totalled $4,3-billion for the quarter, down 26% from the fourth quarter of 2012. Systems and Technology pre-tax income was $0,2-billion, a decrease of $768-million .
Total systems revenues decreased 25%. Revenues from System z mainframe server products decreased 37% compared with the year-ago period. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 26% versus the prior year. Revenues from Power Systems decreased 31% compared with the 2012 period. Revenues from System x decreased 16%. Revenues from System Storage decreased 13%. Revenues from Microelectronics OEM decreased 33%.
The Americas’ fourth-quarter revenues were $12,2-billion, down 3% (down 2%, adjusting for currency) from the 2012 period. Revenues from Europe/Middle East/Africa were $9,2-billion, up 1% (down 2%, adjusting for currency). Asia-Pacific revenues decreased 16% (down 6%, adjusting for currency) to $5,9-billion. OEM revenues were $452-million , down 33% compared with the 2012 fourth quarter.
Revenues from the company’s growth markets decreased 9% (down 6%, adjusting for currency). Revenues in the BRIC countries — Brazil, Russia, India and China — decreased 14% (down 11%, adjusting for currency).
The company’s total gross profit margin was 51,7% in the 2013 fourth quarter compared with 51,8% in the 2012 fourth-quarter period. Total operating (non-GAAP) gross profit margin was 52,6% in the 2013 fourth quarter compared with 52,3% in the 2012 fourth-quarter period, driven by an increase in Services and a mix to Software
Total expense and other income was flat at $7,4-billion compared with the prior-year period. S,G&A expense of $6-billion increased 1% year over year compared with prior-year expense. R,D&E expense of $1,6-billion decreased 1% compared with the year-ago period. Intellectual property and custom development income decreased to $201-million compared with $227-million a year ago. Other (income) and expense was income of $113-million compared with prior-year income of $47-million . Interest expense increased to $113-million compared with $109-million in the prior year.
Total operating (non-GAAP) expense and other income decreased 1% to $7,1-billion compared with the prior-year period. Operating (non-GAAP) S,G&A expense of $5,8-billion was flat compared with prior-year expense. Operating (non-GAAP) R,D&E expense of $1,6-billion decreased 2% compared with the year-ago period.
Net income for the year ended December 31, 2013 was $16,5-billion compared with $16,6-billion in the prior year, a decrease of 1%. Operating (non-GAAP) net income was $18-billion compared with $17,6-billion in 2012, an increase of 2%.
Diluted earnings were $14,94 per share compared with $14,37 per diluted share in 2012, an increase of 4%. Operating (non-GAAP) diluted earnings were $16,28 per share, compared with operating diluted earnings of $15,25 per share in 2012, an increase of 7%. Operating (non-GAAP) diluted earnings per share, excluding second-quarter workforce rebalancing charges, were $16,99.
Revenues for 2013 totalled $99,8-billion, a decrease of 5% (down 2% adjusting for currency), compared with $104,5-billion in 2012.
From a geographic perspective, the Americas’ full-year revenues were $43,2-billion, a decrease of 3% (down 2% adjusting for currency) from the 2012 period. Revenues from Europe/Middle East/Africa were $31,6-billion, flat year to year (down 2%, adjusting for currency). Asia-Pacific revenues decreased 12% to $22,9-billion (down 3% adjusting for currency). OEM revenues were $2-billion, down 13% compared with 2012 (down 12% adjusting for currency).
Revenues from the company’s growth markets decreased 5% (down 2%, adjusting for currency), and represents 23% of IBM’s total geographic revenue. Revenues in the BRIC countries — Brazil, Russia, India and China — decreased 8% (down 6%, adjusting for currency).
Software segment revenues in 2013 totalled $25,9-billion, an increase of 2% (up 3%, adjusting for currency). Total Global Services revenues decreased 3% (flat adjusting for currency). Revenues from the Global Technology Services segment totalled $38,6-billion, a decrease of 4% (down 1%, adjusting for currency) compared with 2012. Revenues from the Global Business Services segment were $18,4-billion, down 1% (up 3%, adjusting for currency). Global Financing segment revenues totalled $2-billion, flat year to year (up 3%, adjusting for currency). Systems and Technology segment revenues were $14,4-billion, a decrease of 19% (down 18%, adjusting for currency).
The company’s total gross profit margin was 48,6% in 2013 compared with 48,1% in 2012. Overall gross profit margins improved year over year for the 10th consecutive year. Total operating (non-GAAP) gross profit margin was 49,7% in the 2013 period compared with 48,7% in the 2012 period, with an increase in Services and a mix to Software.
The weighted-average number of diluted common shares outstanding in 2013 was 1,10-billion compared with 1,16-billion shares in 2012. As of December 31, 2013, there were 15-billion basic common shares outstanding.
Debt, including Global Financing, totalled $39,7-billion, compared with $33,3-billion at year-end 2012. From a management segment view, Global Financing debt totalled $27,5-billion versus $24,5-billion at year-end 2012, resulting in a debt-to-equity ratio of 7,2 to 1. Non-global financing debt totalled $12,2-billion, an increase of $3,4-billion since year-end 2012, resulting in a debt-to-capitalisation ratio of 39%, up from 36,1%.
IBM ended 2013 with $11,1-billion of cash on hand and generated free cash flow of $15-billion excluding Global Financing receivables, down approximately $3,2-billion year over year. The company returned $17,9-billion to shareholders through $4,1-billion in dividends and $13,9-billion of gross share repurchases. The company’s balance sheet remains strong and is well positioned to support the business over the long term.