UPDATE: IBM Q4 net income rises 9 percent

Growth markets and software drive up the company's profits

By , IDG News Service |  Software, IBM

IBM said Tuesday that net income for the fourth quarter ended Dec. 31 rose 9% to $5.3 billion year over year, helped by strong performance in growth markets as well as software and mainframe sales. Revenue for the quarter was $29 billion, a 7% increase.

Full-year net income grew 10% to $14.8 billion, while full-year revenue jumped 4% to $99.9 billion.

"We completed an outstanding year, with record profit and free cash flow, and exceeded the high end of our 2010 earnings per share roadmap objective," said IBM CEO Samuel J. Palmisano in a statement. "We also capped a decade in which our shift to high-value businesses, our global integration of IBM, our investment in research and development of almost $60 billion and our acquisition of 116 companies have helped us to nearly triple our EPS and return more than $100 billion to shareholders."

Fourth-quarter revenue grew 9% in the Americas to $12.2 billion, but fell 2% in Europe, the Middle East and Africa to $9.5 billion. Revenue in the Asia-Pacific region climbed 14% to $6.6 billion.

IBM saw strong growth in emerging markets. Revenue from the BRIC countries -- Brazil, Russia, India and China -- increased 19%, while 50 other countries produced double-digit revenue growth, IBM said.

Software sales in the quarter increased by 7% to $7.0 billion. Within that segment, WebSphere middleware sales were up 32%, but Lotus software sales dropped 3%, suggesting IBM is having trouble against competing collaboration software from the likes of Microsoft.

Business analytics-related revenue remained strong, growing 19% across both software and services, IBM said. IBM's recently acquired Netezza data-warehousing technology, which competes with Oracle's Exadata machines, "got off to a strong start this quarter," Chief Financial Officer Mark Loughridge said during a conference call.

Systems and Technology revenue totaled $6.3 billion, up 21%, spurred in part by strong System z mainframe server sales, which jumped 69% year over year. IBM launched a new System z product last year. System x sales were up 18%, while Power Systems revenue grew 2%.

Global technology services grew 1% to $10.2 billion, while global business services grew 4% to $4.8 billion, IBM said. The company signed services contracts in the fourth quarter worth $22.1 billion, a rise of 18%.

IBM doesn't see the fourth quarter as an anomaly and expects the first quarter to once again be driven by hardware and software sales, Loughridge said.

Services revenue is expected to pick up momentum thanks to a growing backlog of service engagements, he added.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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