IBM and Intel post profit falls

Tech bellwethers see profits head south in Q2 but duo offers contrasting outlooks for year ahead

Two of the IT industry's titans, IBM and Intel, posted big drops in quarterly profits last night but gave contrasting outlooks for the year ahead.

IBM saw Q2 net profit fall 16.9 per cent year on year to $3.23bn (£2.12bn), although that figure included a $1bn hit relating to job cuts – or "workforce rebalancing" as Big Blue is euphemistically calling the process – during the quarter.

Chip maker Intel saw its bottom line drop even more steeply in its Q2 as net profit sank 29 per cent year on year to $2bn.

Out of the two giants, IBM was by far the more optimistic, however, raising its annual forecast because profits were actually ahead of expectations. Stripping out the restructuring charges, its profits were up annually.

It now expects to earn at least $16.90 a share in 2013, an increase on its previous estimate of $16.30.

IBM's total sales fell 3.3 per cent to $24.92bn, better than the 5.1 per cent fall witnessed in the previous quarter.

Software was the blue-eyed boy, with sales rising four per cent to $6.4bn. Key middleware products such as WebSphere, Tivoli and Rational grew nine per cent.

In contrast, sales at its largest arm, Global Technology Services, fell five per cent to $9.5bn. Its hardware division, STG – which is in the process of passing more business to the channel – saw sales drop by 12 per cent to $3.8bn.

In its earnings call, IBM chief financial officer Mark Loughridge also revealed that a "large divestiture project" – likely its efforts to flog its System X arm to Lenovo – "will not likely close by the end of this year, but we are still in active discussions."

"We are not going to underprice or rush a divestiture simply to close within 2013," he said.

Intel, in contrast, lowered its forecast for PC sales for the year, hardly a surprise given the string of apocalyptic statements from analysts over the future of desktop PCs of late. Its revenue for the quarter sank by five per cent to $12.8bn.