IBM gets stuck in Q2 currency quicksand

Big Blue's revenue falls three per cent as weakening euro takes shine off solid quarter

Currency headwinds battered IBM's Q2 sales but the IT hegemon still saw fit to raise its full-year profit expectations in response to what was a fairly robust quarter.

Big Blue's total revenue for the three months to 30 June fell three per cent year on year in dollar terms to $25.8bn (£16.5bn) as it battled against a nine per cent currency headwind in EMEA.

Stripping out the impact of the flatlining euro and other currency fluctuations, IBM's sales actually rose one per cent.

EMEA sales were flat in constant currencies, with the UK business growing for an 11th quarter in a row.

Software was IBM's blue-eyed boy in Q2, with revenue rising four per cent to $6.2bn adjusting for currency. IBM's key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, also grew four per cent.

Cloud revenue doubled in the first half, it added.

But while Global Technology Services revenue rose two per cent to $10bn in local currencies, Big Blue's hardware sales plunged by seven per cent to $4.3bn.

Total system sales fell five per cent in local currencies, with System x down eight per cent, System z down 11 per cent, Power Systems down seven per cent and System Storage revenue down four per cent.

"Our hardware business declined as you would expect at this point in our product cycles though we continue to extend our share leadership in our two high-end server brands," chief financial officer Mark Loughridge said on a conference call, a transcript of which can be found here.

IBM's total GAAP net profit rose six per cent to $3.9bn and the firm also hoisted its profit expectations for the full year.

Ginni Rometty (pictured), who replaced Sam Palmisano as IBM chief executive in January, struck an optimistic tone as she assessed Big Blue's Q2 performance.

"In the second quarter, we delivered strong profit, earnings per share and free cashflow growth," she said.

"This performance reflects continued strength in our growth initiatives and investments in higher-value opportunities. These are fundamental elements of our long-term business model."