IBM 4Q 2012 Earnings Rise On Software Sales

IBM announced this afternoon fourth-quarter 2012 diluted earnings of $5.13 per share, compared with diluted earnings of $4.62 per share in the fourth quarter of 2011, an increase of 11 percent.

Fourth-quarter net income was $5.8 billion compared with $5.5 billion in the fourth quarter of 2011, an increase of 6 percent. Total revenues for the fourth quarter of 2012 of $29.3 billion decreased 1 percent (flat adjusting for currency) from the fourth quarter of 2011.

“We achieved record profit, earnings per share and free cash flow in 2012. Our performance in the fourth quarter and for the full year was driven by our strategic growth initiatives — growth markets, analytics, cloud computing, Smarter Planet solutions — which support our continued shift to higher-value businesses,” said Ginni Rometty, IBM chairman, president and chief executive officer.

“Looking ahead, we continue to invest to deliver innovations for the enterprise in key areas such as big data, mobile solutions, social business and security, while expanding into new markets and reaching new clients. We are well on track toward our long-term roadmap for operating EPS of at least $20 in 2015.”

Following are key details of 4Q 2012 earnings:

Fourth-Quarter 2012

Diluted EPS:

GAAP: $5.13, up 11 percent;

Operating (non-GAAP): $5.39, up 14 percent;

Net income:

GAAP: $5.8 billion, up 6 percent;

Operating (non-GAAP): $6.1 billion, up 10 percent;

Gross profit margin:

GAAP: 51.8 percent, up 1.8 points;

Operating (non-GAAP): 52.3 percent, up 2.1 points;

Revenue of $29.3 billion, down 1 percent, flat adjusting for currency:

Up 1 percent excluding divested RSS business adjusting for currency;

Free cash flow of $9.5 billion, up $0.6 billion;

Software revenue up 3 percent, up 4 percent adjusting for currency;

Services revenue down 2 percent, down 1 percent adjusting for currency;

Services backlog of $140 billion, flat, up $1 billion adjusting for currency;

Systems and Technology revenue down 1 percent, up 4 percent excluding RSS:

System z mainframe up 56 percent.

Full Year 2012

Diluted EPS, up double-digits for 10th consecutive year:

GAAP: $14.37, up 10 percent;

Operating (non-GAAP): $15.25, up 13 percent;

Net income:

GAAP: $16.6 billion, up 5 percent;

Operating (non-GAAP): $17.6 billion, up 8 percent;

Revenue of $104.5 billion, down 2 percent, flat adjusting for currency;

Free cash flow of $18.2 billion, up $1.6 billion;

Growth markets revenue up 4 percent, up 7 percent adjusting for currency:

BRIC countries up 7 percent, up 12 percent adjusting for currency;

Business analytics revenue up 13 percent;

Smarter Planet revenue up more than 25 percent;

Cloud revenue up 80 percent.

Full-Year 2013 Expectation:

GAAP EPS of at least $15.53 and operating (non-GAAP) EPS of at least $16.70.

IBM 2Q 2012 Earnings: $3.51 EPS (Up 14% YOY), $25.8 Billion Revenue

IBM 2012 second quarter earnings were just released, and IBM’s operating earnings per share (non-GAAP) came in above expectations at $3.51/share, a 14 percent increase YOY.

Revenue came in at $25.8 billion, down 3 percent YOY, but up 1 percent YOY when adjusted for common currency.

Operating net income was $4.1 billion, up 8 percent YOY, and free cash flow came in at $3.7 billion, up 9 percent YOY.

Second quarter segment highlights included software revenue led by Europe, Japan and the growth markets, and services profit, which was up 18 percent (with the services backlog flat at constant currency).

IBM’s software business reported revenues of $6.2 billion, which were up 4 percent when adjusted for common currency.

Once again, the WebSphere brand led the way, coming in at 3 percent growth YOY (7 percent when adjusted for common currency).

The Tivoli brand grew 2 percent YOY, 6 percent when adjusted for common currency. Overall gross margins for the software business were flat at 88.4 percent, but pre-tax income was $2.5 billion, up some 8 percent YOY.

IBM’s Systems and Technology group revenues were negatively impacted by the product cycle, coming in down 9 percent YOY, but STG gained share in the POWER systems segment.

IBM saw continued strength in its growth initiatives, with growth markets realizing YTD revenue growth of 9 percent YOY when adjusted for constant currency, and its business analytics business up 13 percent YOY.

Cloud computing revenue doubled YOY, and Smarter Planet revenue grew by over 20 percent YOY.

IBM’s annuity business provided a solid base of revenue, profit, and cash, and productivity initiatives drove structural improvements and helped contribute to IBM’s margin expansion.

Following is what IBM CEO Ginny Rometty had to say about IBM’s 2Q 2012 earnings:

“In the second quarter, we delivered strong profit, earnings per share and free cash flow growth. This performance reflects continued strength in our growth initiatives and investments in higher value opportunities,” said Ginni Rometty, IBM president and chief executive officer. “These are fundamental elements of our long-term business model.

“Looking ahead, we are well positioned to deliver greater value to a wider range of clients and to our shareholders. Given our performance in the first half and our outlook for the second half, we are raising our full-year operating earnings per share expectations to at least $15.10.”

Paying Dividends…For 96 Years

IBM held its annual shareholders meeting earlier today in North Charleston, South Carolina, at which the IBM board of directors declared a regular quarterly cash dividend of $0.85 per common share, payable on June 9, 2012 to stockholders of record May 10, 2012.

This dividend declaration represents an increase of $0.10, or 13 percent higher than the prior quarterly dividend of $0.75 per common share.

This is the 17^th year in a row that IBM has increased its quarterly cash dividend, and the ninth consecutive year of double-digit percent increases.

IBM has increased its dividend by over 600 percent since the beginning of 2000, and with the payment of the June 9^th dividend, IBM will have paid consecutive quarterly dividends every year since 1916.

IBM’s board also authorized $7 billion in additional funds for use in the company’s stock repurchase program. IBM will repurchase shares on the open market or in private transactions from time to time, depending on market conditions.

This is in addition to approximately $5.7 billion remaining at the end of March from a prior authorization.

With this new authorization, IBM will have approximately $12.7 billion for its stock repurchase program.

IBM has reduced its share count by a third since the start of 2000.

Ginni Rometty, IBM president and chief executive officer, had this to say about the announcement: “We continue in our commitment to deliver value to our shareholders.  Since 2000, we have returned over $137 billion to shareholders in the form of dividends and share repurchases.  At the same time, we continue to invest in capital expenditures, acquisitions and research and development, to keep IBM at the forefront of innovation.”

IBM shares were up 2.28 percent on the news.

Advancing Security Intelligence to Help Organizations Combat Increasing Threats

If you’ve been curious as to what IBM has been up to on the security front, today’s a good day to check in.

The top global cyber security threats in 2011, according to a recent IBM analysis.

Earlier today, the Dow Jones AllThingsD blog had this post about some new capabilities IBM is announcing on the security front.

Today, IBM unveiled several new services planned for its security intelligence platform designed to combine deep analytics with real-time data feeds from hundreds of different sources to give organizations, for the first time, the ability to help proactively protect themselves from increasingly sophisticated and complex security threats and attacks using a single platform.

The Backdrop

Organizations today are struggling to defend themselves against an onslaught of ever-evolving data breaches, such as theft of customer and employee information, credit card data and corporate intellectual property.

To date, many corporations have been unable to create a security defense system because they have cobbled together technologies that don’t integrate in an intelligent and automated fashion.  This patchwork approach has created loopholes that hackers can exploit.

The QRadar Security Intelligence Platform, designed by Q1 Labs and acquired by IBM last fall, tackles this problem head-on by serving as a control center that integrates real-time security intelligence data to include more than 400 different sources.

Major breakthroughs planned in the security platform include:

• Threat Intelligence – Intelligence from one of the world’s largest repository of threat and vulnerability insights is planned to be available based on the real-time monitoring of 13 billion security events per day from the IBM X-Force Threat Intelligence Feed. This insight can flag behavior that may be associated with Advanced Persistent Threats, which may emanate from teams of attackers accessing networks through stealth means.
• Visibility into Enterprise Activity – The platform will unite events from IBM and non-IBM products that span four areas of organizational risk – infrastructure, people, applications and data.
• Pinpoint Analysis in an Age of Big Data – The platform can drill down to basic data elements to help analyze issues emanating from network access information at the periphery to database activity at the core of a business.

Jack Danahy, Director of Advanced Security at IBM talks about security intelligence. For more information, please visit ibm.com/security.

New Integrations Bring Real-Time Security Analytics

With new integrations to be made available, the analytics platform can quickly identify abnormal activity by combining the contextual awareness of the latest threats and methods being used by hackers with real-time analysis of the traffic on the corporate IT infrastructure.

For example, the future integrations permit the platform to detect when multiple failed logins to a database server are followed by a successful login and access to credit card tables, followed by an upload to an unknown site.

“We chose the QRadar platform to build on and deliver our vision of a streamlined, highly intelligent platform to serve as our central nervous system for enterprise-wide monitoring,” said Ken Major, Information Security Officer at AmeriCU Credit Union. “It enables us to achieve our goals, industry best practices and regulatory compliance.”

Threat Intelligence

One of the significant planned integrations for the QRadar platform is IBM’s X-Force Intelligence Threat Feed based on the real-time monitoring of 13 billion security events per day, on average, for nearly 4,000 clients in more than 130 countries.

The QRadar platform will have visibility into the latest security trends worldwide to help protect enterprises against emerging risks. QRadar will present current IBM X-Force threat feeds in dashboard views for users, and correlate an organization’s security and network events with these threats and vulnerabilities in real-time using automated rules.

Broad Coverage

Other planned integrations to allow the QRadar Security Intelligence Platform to help clients more rapidly identify threats by connecting events from the following categories:

• People: Organizations should control access to key systems and information. An employee’s unauthorized access to key databases and client information can leave a firm vulnerable to security breaches. With security intelligence, security teams can quickly determine whether access patterns exhibited by a given user are consistent with the user’s role and permissions within the organization. IBM Security Identity Manager and IBM Security Access Manager will integrate with the QRadar platform, complementing QRadar’s existing support for enterprise directories such as Microsoft Active Directory.
• Data: Data is at the core of security; it is what’s behind every security measure in place, and is the primary target of cyber-criminals. With IBM Guardium Database Security integrated with the security intelligence platform, users will be able to better correlate unauthorized or suspicious activity at the database layer – such as a database administrator accessing credit card tables during off-hours – with anomalous activity detected at the network layer, such as credit card records being sent to unfamiliar servers on the Internet.
• Applications: Applications are vital to day-to-day function but can also introduce new and serious vulnerabilities into company networks. Applications, because of their sensitivity, should be updated frequently. Organizations however are often unable to patch immediately due to corporate testing requirements and change control cycles. With security intelligence, companies will be able to automatically alert security teams to unpatched Web applications that risk being attacked by known application-layer exploits  that have previously been identified by IBM Security AppScan. This planned integration complements existing QRadar support for monitoring enterprise applications such as IBM WebSphere and SAP ERP.
• Infrastructure: Today, organizations struggle to secure thousands of physical devices, such as PCs and mobile phones, especially as Bring Your Own Device (BYOD) continues to grow in popularity. For this reason, companies should take extra precautions to help employees to follow secure practices in using these devices. With IBM Endpoint Manager integration, the security platform can provide organizations with enhanced protection of physical and virtual endpoints: servers, desktops, roaming laptops, smartphones and tablets, plus specialized equipment such as point-of-sale devices, ATMs and self-service kiosks.

QRadar integration modules are also planned for Symantec DLP, Websense Triton, Stonesoft Stonegate and other third-party products, increasing QRadar’s ecosystem and continuing Q1 Labs’ long-standing approach to multi-vendor heterogeneous environments.

Solutions to Analyze Big Data

In addition, the QRadar platform has been expanded with Big Data capabilities for storing and querying massive amounts of security information, and functionality for helping to secure virtualized infrastructures and providing a new level of visibility that helps clients reduce security risk and automate their compliance processes.

The expansion of security and network data sources is complemented by advanced functionality to help organizations keep pace with their exponential data growth. The new deliverables include:

• Instant Search to provide high-speed, free-text querying of both log and flow data, designed to bring the simplicity and speed of Internet search engines to the security intelligence solution.
• The XX24 appliance series to extend the scalability and performance advantages for which QRadar solutions are well known. With the release of the QRadar 3124 SIEM appliances, QRadar 1624 Event Processor and QRadar 1724 Flow Processor – which all include 16TB of usable storage and 64GB of RAM – organizations can support more users, achieve higher performance and store data longer.
• Intelligent data policy management to enable users to designate which information they want to store and for how long. Less important data can be removed sooner to achieve longer retention for more important data.
• Virtual appliances to allow end customers and service providers to capitalize on the virtual infrastructures they have built, while benefiting from lower-priced yet fully capable security intelligence solutions.

The planned integration modules (device support modules) are expected to be included with QRadar SIEM and QRadar Log Manager at no additional cost, via automatic updates.

Availability

The Big Data and virtual infrastructure enhancements are available now.  QRadar integration modules for IBM Guardium Database Security are planned to be available in 1Q2012.

Integration modules for IBM X-Force Threat Intelligence, IBM Security Identity Manager, IBM Security Access Manager, IBM Security AppScan and IBM Endpoint Manager are planned to be available in 2Q2012.

Visit Q1Labs’ site for more information.

Managing & Mitigating Risk: The 2011 IBM Global Business Risk & Resilience Survey

Once again, IBM has published a global business risk and resilience study, this year in partnership with Economist Intelligence Unit on behalf of IBM.

The study was conducted in June of this year, and included responses from 391 senior executives…Thirty-five percent of the respondents were C-level executives…About 39% were from North America,38% from Western Europe, 20% from Asia Pacific, and 3% from Eastern Europe.

Companies with less than U.S. $500M in revenue comprised 39% of the responses, and 48% of the respondents hailed from companies with more than U.S. $1 billion in revenue…The survey also covered a gamut of industries, including financial services (16%), IT and technology (16%), professional services (13%), manufacturing (8%) and healthcare (7%).

Click on the image to enlarge. The IBM Global Risk & Resilience Study revealed that to date, companies around the world are focused heavily on building out their resilience and risk plans, as well as putting the supporting technologies and processes in place to get them into effect.

Before I dive into the results, here’s the setup: Global organizations are increasingly emphasizing business resilience; that is, the ability to rapidly adapt to a continuously changing business environment. Resilient corproations are able to maintain continuous operations and protect their market share in the face of natural or man-made disasters as well as radical changes in the financial or economic climate. They are also equipped to seize opportunities created by unexpected events.

So, the question is, are they?

It’s a mixed bag.

The research suggests that more and more businesses will adopt a more holistic approach to risk management in the next three years ass they deal with growing uncertainty and the increasing interconnectedness of the varied risks they face.

That’s the good news, aspirational though it may be.

But in terms of today’s reality, the study indicated that only a minority of companies (37%) has implemented an organization-wide business resilience strategy…with 42% saying they’ll do so in the next three years.

Almost two-thirds (64%) say they have a business continuity plan of some sort, and a robust 58% have dedicated contingency plans for dealing with a variety of risks.

That’s the topline…now on to the deeper dive:

• Larger organizations are more likely than smaller ones to have an integrated strategy.  They, of course, typically have more to lose, and complexity increase’s an organization’s exposure to risk. Larger firms are more likely to have assigned overall responsibility for enterprise risk management to a single executive (which means, of course, direct accountability). Still, there is a contingent of small companies that have adopted integrated strategies. These companies also rank highly with regard to indicators of success such as revenue growth, profitability, and market share.

• Continuity, IT and compliance risks remain in the foyrefront, but companies are diversifying their strategies to build business resilience. Nearly 40% of respondents say their organization regards business continuity as primarily an IT issue. However, when they’re asked to name their “primary risk management concern,” some name more than one, including disaster recovery (47%), IT security (37%), and regulatory compliance (28%). Though most have started by addressing the largest threats first, they increasingly are expected to turn to such things as communications and training programs designged to build a more resilient culture overall.
• Business resilience planning increasingly involves specialists from across the organization, yet CIOs and IT pros remain the most prominent stakeholders.  Hey, what happened to sharing the love…and the risk??  Because a culture that imbues responsibility for risk management at every level enables companies to respond to changes and unexpected events. A solid majority of respondents (60%) say that business resilience is considered a joint responsibility of all C-level execs. Yet as IT penetrates more deeply into every aspect of company operations, CIOs and IT pros remain key players in building more resilient organizations. Fifty-six percent of respondents say the CIO collaborates with top IT strategists much more frequently than three years ago.

Click on the image to enlarge. Silos, budget and predicting ROI were cited as the biggest barriers in the study to adopting an holistic approach to business resilience and risk.

How Can I Better Manage Risk Moving Forward?

In most organizations, improving business resilience requires a shift in corporate culture because that is what shapes values and behavior. If a company’s culture blends risk awareness with other corporate values, then people instinctively know the right thing to do when confronted with an unexpected situation, and that reduces risk.

Understanding these principles is a good first step, but in interviews, executives are clear that buy-in from the top is essential to foster broad organizational change. Promoting holistic risk management concepts to peers and employees is also critical.

Taking an incremental approach with broad participation in strategy development can help, because it is easier to promote change if a new initiative is not seen as being pushed by one particular faction.

Senior-level commitment and adequate resources are also needed to develop comprehensive communications and training programs to support integrated risk management. One of the distinguishing features of the most resilient companies is that they are much more likely than other firms to have developed a communications strategy to push the message of resilience out to every corner of the organization.

Companies that embrace these measures are more likely to create an effective business resilience plan. This will provide a robust foundation on which to build a long-lived competitive position supported by end-to-end risk management.

Go here to download the full report.

IBM Acquires Governance Software Firm Clarity Systems

IBM announced today it has acquired Clarity Systems, a privately-held company based in Toronto, Canada.

Financial terms were not disclosed.

Clarity Systems delivers financial governance software that enables organizations to automate the process of collecting, preparing, certifying and controlling financial statements for electronic filing, in support of mandates by the SEC and other financial regulatory agencies.

To significantly reduce the risks of potential error and the lengthy times required to create and file financial documents, Clarity Systems software allows finance professionals to seamlessly integrate information for more efficient planning, consolidation and financial reporting.

The acquisition of Clarity Systems extends IBM’s business analytics initiatives, and represents IBM’s commitment to address financial governance and risk management challenges faced by financial departments in virtually every industry.

With today’s news, IBM now has a comprehensive portfolio of business analytics software for financial professionals to plan, forecast and analyze performance, identify and manage key business risks, and report to external stakeholders with confidence.

The Backdrop: Need For Improved Financial Risk Management, Forecasting

Finance departments in organizations are relied upon to provide accurate data more quickly, improve risk management and forecasting decisions, and meet financial business goals. To address these demands, CFOs and finance managers are increasingly relying on business analytics software to make faster decisions to anticipate performance gaps, prioritize resources, and gain insight into profit and growth.

A recent IBM study of 1,900 global CFOs and senior finance leaders revealed enterprises that have adopted standards and increased finance efficiency are performing 25 percent better by strengthening compliance programs and internal controls. The study also indicated that enforcing data standards, integrating information and applying business analytics are key capabilities that enable improved business insight and risk management.

With Clarity Systems, organizations will be able to more easily combine financial statements, operational details, commentary, notes, charts and pictures – virtually an unlimited assortment of content – into a single document.

By integrating all of these information resources, customers are able to reduce the possibility of errors and late filings, and quickly and easily produce documents for external filing.

Current Clarity Customers

Today, 600 global clients across multiple industry segments are using Clarity Systems software to improve business processes and increase efficiency and accountability.

In fact, some of the world’s largest transportation, financial services, and energy and utility organizations address financial reporting and risk management with Clarity Systems software, including British Airways, WSFS Financial Corporation, Young & Co.’s Brewery plc, Five Star Quality Care, Inc., Oglethorpe Power Corporation and Sempra Energy Utilities.

“Smarter decisions thrive on accurate financial information, and it is therefore imperative that financial governance systems reduce risk of error and provide confidence in the external reporting process,” said Rob Ashe, general manager, business analytics, IBM. “Clarity Systems extends IBM’s business analytics capabilities to the office of finance by enabling organizations to help businesses automate complex governance processes, improve data accuracy and provide the foundation for addressing a wide array of regulatory reporting mandates.”

Closing The Loop On OpenPages

Clarity Systems complements IBM’s recent acquisition of OpenPages that helps companies more easily identify and manage governance, risk and compliance activities across the enterprise through a single management system. The addition of Clarity Systems and OpenPages gives the office of the CFO a comprehensive set of solutions for financial performance and strategy management, risk management and compliance, and financial governance.

“Clarity System’s unified approach offers the flexibility, security, and control needed to make more informed business decisions while meeting compliance requirements,” said Mark Nashman, president & CTO, Clarity Systems. “As a part of IBM, we can bring our leading financial governance solution to an established set of customers who need to effectively and efficiently execute the creation and delivery of external regulatory filings.”

Clarity Systems also has strong capabilities in core performance management, such as budgeting, planning and forecasting. Client and partner investments in existing IBM and Clarity Systems technologies will be preserved, allowing customers to take advantage of the broader set of capabilities without the need to replace existing systems.

With the deal, IBM adds more than 400 financial management experts across products, sales, services, and support, and a growing network of financial governance and performance management partners worldwide.

IBM will integrate Clarity Systems within its Business Analytics software portfolio.

In just four years, IBM has invested more than $14 billion in 24 analytics related acquisitions, dedicated 7,000 consultants and opened eight analytics Centers of Excellence around the world to help clients uncover hidden insights within their data.