Bigger returns for IBMshareholders

By Bob Freund

IBM Corp.'s profit topped $2 billion in its latest quarter, while revenue shrank compared to a year earlier.

Big Blue's performance of $1.30 a common share beat analysts' profit expectations by a penny, according to tracking firm First Call. It also was up 16 percent from $1.12 a share, a year earlier.

Revenue declined almost 2 percent to $21.89 billion in the second quarter. But the sale of IBM's personal computer business to Lenovo Corp. in spring 2005 explained the shrinkage. With the effects of PCs excluded, revenue would have grown 1 percent, IBM said. On the other hand, earnings would have grown only 10 percent, according to company figures.


Software was a prime performer for Big Blue, with revenue up 24 percent and its increase in pre-tax income just as good.

Meanwhile, IBM's largest division, Global Services, fell back 1 percent in sales. Chief financial officer Mark Loughridge noted in remarks to industry analysts that sales in the same quarter a year ago had been high, making for a "very challenging compare."

The revenue given up in divestment of the PC business also affected the hardware segment, which was down 7 percent from a year earlier at $5.15 billion. Without the PC business, hardware would have been up 3 percent, IBM said.

The company also beefed up returns to shareholders during the quarter. IBM announced the biggest dividend increase in its history, which capped a $750 million payout to stockholders so far this year, Loughridge said. IBM also repurchased $5.1 billion of its own stock, or 52.7 million shares, in the first half of the year.

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