IBM weathers the economic storm

Growth market strategy pays off for both IBM and Malaysia

Petaling Jaya, 30 July 2008 - IBM’s second quarter results blew past Wall Street's expectations again, sending an undeniable message – over the last year, IBM is one blue chip company that has weathered the economic downturn.

On July 17, IBM announced its second quarter results, with earnings up 28% to $1.98 per share, beating analyst consensus estimates of $1.81 per share. Revenue was also significantly higher than analyst estimates, up 13% to $26.8 billion compared to the same quarter last year. Margins improved again -- IBM has expanded gross profit margins in 15 out of the last 16 quarters.

IBM’s strong performance in the second quarter underlines the success of IBM’s strategy of investing in emerging economies as these developing nations build out their infrastructures. By doing business in over 170 countries, IBM enjoys an increasingly broad-based geographic distribution of revenue. Revenue from countries in IBM’s new Growth Markets organization grew 21 percent, representing 18 percent of the company’s geographic revenue. Asia Pacific, where IBM's key growth markets are located, grew 16% to $5.3 billion.

Malaysia is part of IBM's Growth Market organization, headquartered in Shanghai, China, and represents 60 percent of the world's IT growth. IBM continues to invest in Malaysia, which plays a key role in its globally integrated enterprise strategy. From three employees in its earliest operations, IBM in Malaysia has grown to over 3,000 strong today with more than 10 shared centers in the country that cater to functions like research and development, accounting, and finance. It has also recently launched a new building to house its ASEAN Regional Contact Center, which will increase its capacity to support IBM's global clients in 70 countries as well as more than 12,000 IBM users in the ASEAN region.

“For 47 years now, IBM has been at the forefront of the continuous advancement of business and technological innovation in Malaysia," said Ou Shian Waei, Managing Director, IBM Malaysia. "We have also embraced global opportunities, shifted our focus to higher value spaces and transformed our offerings and management systems to deliver what our clients really want: integration and innovation. At the same time, we are also working closely with the government on realizing Malaysia's goal to become a global ICT hub with our shared centers as well as our initiatives in human capital development with programs like Service Science Management and Engineering (SSME)."

In Malaysia, IBM has been delivering its expertise and technologies to create client values in different industries. These client engagements require an understanding of complex business issues, the ability to integrate and understand data across the enterprise, and the ability to create the new computing models that can run and optimize these new business systems. For example, IBM Malaysia worked with Public Bank Bhd in introducing new applications to serve their customers better, as well as enhancing and upgrading their IT capacity to meet their next wave of growth while reducing overall IT operational costs. These are all indicative of a new level of services being applied to businesses, which is made possible by the kinds of investments IBM has made in the last five years.

IBM's investments -- the acquisition of Vallent which resulted in IBM's first and only lab in ASEAN right here in Malaysia, the PwC Consulting acquisition, the integration of Research into services, Cloud Computing initiative, supercomputing breakthroughs, a slew of asset-based software and services investments in the areas of Services Oriented Architecture and Information on Demand -- over the past five years help IBM build its capabilities to create and deliver high value to its customers.

The IBM difference is working in the marketplace. Five years ago, IBM undertook a radical transformation of its business. The bet is now paying off.