International Business Machines Corp IBM
Q2 2013 Earnings Call Transcript

Transcript Call Date 07/17/2013

Operator: Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now I will turn the meeting over to Ms. Patricia Murphy, Vice President of Investor Relations. Ma'am, you may begin.

Patricia Murphy - VP, IR: Thank you. This is Patricia Murphy, Vice President of Investor Relations for IBM. I'm here with Mark Loughridge, IBM's Senior Vice President and CFO, Finance and Enterprise Transformation.

Thank you for joining our second quarter earnings presentation. The prepared remarks will be available in roughly an hour, and a replay of this webcast will be posted to our Investor Relations website by this time tomorrow.

Our presentation includes certain non-GAAP financial measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. You will find reconciliation charts at the end, and in the Form 8-K submitted to the SEC.

Let me remind you that certain comments made in this presentation may be characterized as forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the Company's filings with the SEC. Copies are available from the SEC, from the IBM website, or from us in Investor Relations.

Now, I'll turn the call over to Mark Loughridge.

Mark Loughridge - SVP and CFO, Finance and Enterprise Transformation: Thank you for joining us today. In the second quarter we reported revenue of $24.9 billion and operating earnings per share of $3.22. Our EPS includes $1 billion charge for workforce rebalancing. Excluding workforce rebalancing activity in both years, our operating EPS was $3.91, up 8% year-to-year. We had good performance in our high-value, higher-margin businesses, contributing to the sequential improvement in our year-to-year revenue performance into margin expansion.

Software returned to mid-single digit growth. In fact, this was the best constant currency Software growth since the first quarter of 2012. Performance was led by 10% growth at constant currency in our key branded middleware and we gained share in all five brands.

In Services, GBS improved revenue performance and returned to growth at constant currency, while GTS revenue growth was consistent with last quarter. With a significant amount of new business in the quarter, our total services backlog was up 7% at constant currency or 3% at spot rates to $141 billion. Our hardware performance is mixed. We had strong performance in System z mainframe, which generated double-digit revenue growth at constant currency. Power and storage had some modest improvement in year-to-year performance, though still declined. Across our segments, Smarter Planet was up over 25% and cloud over 70% for the first half.

Business Analytics growth improved this quarter to 11% with good performance across GBS and Software. These initiatives addressed key market trends, like mobile, social and big data.

Read our Earnings Call Transcript disclaimer.
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