IBM’s Q3 Profit Up 7 Percent

IBM saw its third-quarter revenue rise 8 percent to $26.2 billion, largely based on the company’s performance in growth markets, software and services. Moreover, IBM reported that net income in this interval grew 7 percent to $3.8 billion from $3.6 billion.

"In the third quarter, we drove revenue growth, margin expansion and increased earnings as a result of our innovation-based strategy and continued investment in growth initiatives," Samuel J. Palmisano, IBM chairman, president and CEO, said in a statement. “Growth markets delivered outstanding revenue performance across software, hardware and services, and contributed to the company’s expanded margins. We also achieved strong results in Smarter Planet, business analytics and cloud."

IBM s third-quarter results were led by software, which saw revenue growth of 13 percent. Services revenue grew 9 percent, and IBM’s Systems and Technology Group s revenue rose 4 percent. In addition, IBM experienced solid gains in its growth initiatives. Growth markets revenue was up 19 percent; business analytics revenue was also up 19 percent; IBM Smarter Planet revenue rose 50 percent; and cloud revenue year-to-date is already double IBM’s cloud revenue for all of 2010.

“Consistent with our model, growth markets, along with our other key growth initiatives, are driving our revenue performance,” Mark Loughridge, IBM’s senior vice president and chief financial officer of finance and enterprise transformation, said during an Oct. 17 call with analysts.

Revenue from the company’s growth markets increased 19 percent. Revenue in the BRIC countries–Brazil, Russia, India and China–increased 17 percent. Growth markets revenue represents 23 percent of IBM’s total geographic revenue for the third quarter.

“We did well in the BRIC countries, but two-thirds of our growth market business lies outside of the BRIC countries,” Loughridge said. “We’re seeing significant growth in 40 growth-market countries, not just these BRIC countries. We have 36 other countries driving revenue as part of IBM’s growth markets strategy.”

In addition, Loughridge said revenue from growth markets has been increasing several points more–and faster–than IBM’s major markets over the last few years. What’s more, he said, “The growth markets have a lot of margin capability.” For instance, big banks in Africa and Asia are looking to rebuild infrastructure, which means new mainframe deals, he said, adding that the continued telecom boom in Asia represents a key opportunity.

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