IBM's strongest results likely came from the services sector, which had total revenue of $13.1 billion in the same quarter of last year and grew over 17% year over year during the first quarter of 2008. IBM services continue to leverage growth from emerging markets, from research and development, and "from the heavy lifting of restructuring in the past," TBR's Eugene Zakharov wrote in an email response to questions.
"All these are lined up to help Big Blue reap the benefits and post strong quarterly results," Zakharov added. The dollar's weakness and IBM's broad portfolio of services continue to help.
Foreign exchange added 7 cents to IBM's EPS during the first quarter.Despite the launch of the company's z mainframe late in the first quarter, which American Technology analyst Shaw Wu said has driven higher margins, the Systems & Technology group will likely be flat, year over year. The hardware business took in $5.1 billion in the quarter a year ago and was down 6.7% in the first quarter. Strong sales of the new z model will save the quarter in hardware."The z sounds like it's doing well," Jones says, probably because of a two-and-a-half-year gap since the launch of its predecessor model. The hardware business does well from a profit standpoint, Foster said. "They just can't move the revenue dial," because IBM already "owns" the mainframe business and is not growing market share in x86 servers and blades, where H-P is strongest, Foster added.