According to Gartner’s recent report, worldwide IT spending is projected to grow 3% over the year to $3.6 trillion this year. The estimates are higher than expected growth rate of 2.5% over the year published earlier. By segment, computing hardware market is projected to grow 3.4% over the year to $420 billion. Enterprise software will see higher growth of 4.3% to $281 billion, and IT services are projected to grow 2.3% over the year to $864 billion. Analysts expects the most growth in telecom equipment spending, which is projected to rise 10.8% over the year to $377 billion, while the Telecom services segment will see the slowest growth at 1.4% to $1,686 billion.
IBM’s (Nasdaq:IBM) Q2 revenues fell 3.3% over the year to $25.78 billion, missing the market’s estimate of $26.31 billion. Revenues were hurt by the company’s continued focus on software sales and the euro crisis. Hardware sales for the quarter fell 9% over the year. The euro crisis impacted foreign currency rates and pulled IBM’s revenues down by $1 billion. On a constant currency basis, revenues would have grown 1% over the year.
EPS of $3.51, however, was significantly ahead of the Street’s expectations of $3.42. This was the 38th consecutive quarter of EPS growth, and the 28th in which EPS either met or exceeded market projections.
IBM saw increased traction in the emerging markets of Brazil, Russia, India, and China (BRIC), countries where revenues grew 5% over the year and 12% over the year on a constant currency basis. Revenue in the Americas fell 1% over the year, while revenues from Europe, the Middle East and Africa fell 9% over the year owing largely to weak performances from France and Italy. Asia Pacific revenues grew 2% over the year during the quarter.
By segment, revenues from Global Technology Services fell 2.4% over the year to $9.99 billion. Global Business Services revenues fell 4% over the year to $4.67 billion. Software sales remained flat at $6.17 billion, while Systems and Technology revenues fell 9.0% to $4.23 billion.
For the current year, IBM continued to raise its earnings guidance and now projects EPS of $15.10 against an earlier outlook of $15.
IBM’s Acquisitions in Web Experience and Big Data Technologies
As part of its acquisition plans, IBM recently acquired Tealeaf Technology, a provider of consumer analytics software. Tealeaf’s software helps collect information about a user’s web experience. It can record what each customer is doing and viewing in real-time on any online page, across all site visits and browsers. Tealeaf is able to assess a site’s reaction in response to the customer’s requests and thus determines quantitative and qualitative details of every interaction. Tealeaf provides this analytical capability to organizations, which can then manage and improve customer experience. The acquisition will help IBM enhance its smarter commerce initiative to help organizations tailor marketing campaigns and increase conversion rates. At the time of acquisition, Tealeaf had more than 450 customers globally, including Dell, Wells Fargo, and Air Canada, to name a few.
As part of its Big Data analytics growth, IBM acquired Vivisimo, an enterprise search software provider. Vivisimo provides organizations with search software to help analyze Big Data. It offers both standalone search applications or as pre-loaded versions embedded within partner applications and solutions. IBM will be able to use Vivisimo’s technology with its Big Data platform. Vivisimo’s customer list of more than 140 customers includes names like Airbus, the U.S. Air Force, and the Social Security Administration, among others.
IBM’s stock is trading at $192.45, with a market capitalization of $221.13 billion. It touched a 52-week high of $210.69 in April 2011.