I.B.M. has reported that its second-quarter operating earnings are higher than what Wall Street estimated for the quarter. However, revenue was down 3 percent, which fell below analysts’ forecasts. Net income for the company fell 17 percent to $3.2 billion, or $2.91 a share, compared with income of nearly $3.9 billion in the same quarter a year ago. M. Sacconaghi, an analyst at Sanford C. Bernstein, said, “The results are positive compared to earnings expectations. But it’s mixed.”
The earnings report provided some reassurance to investors after the company stumbled in the first quarter. The company’s software division delivered a strong performance for the quarter. Profit margins for the software rose and new contract signings in major services like data analysis increased sharply. However, its hardware business continued to struggle.
I.B.M. has been fighting against the challenges of fast-changing technology and a soft global economy. However, both the company and its investors have chosen to think positive. I.B.M. has raised its guidance for earnings per share by 20 cents for the year to “at least $16.90 a share.”
The earnings report included a charge of about $1 billion for the trimming of the company’s work force. In April, I.B.M. announced that the charge would be taken this quarter and that the majority of the affected workers would be outside the United States. I.B.M. has taken annual charges in recent years for what it calls “work force rebalancing” that average several hundred million dollars. The work force charge is being taken in a single quarter this year instead of being spread across an entire year.
With its “work force rebalancing,” the company dismisses workers in higher-cost nations and in businesses that are being trimmed, and adds employees elsewhere, especially in lower-cost nations like India. I.B.M. says the process reflects both financial discipline and globalization as it hires and invests in faster-growing markets. The net effect has been an expansion of its global work force to more than 430,000 employees worldwide.
