Nomura Securities on Global Software: Read-across from IBM's Q411 Results

Nomura Securities on Global Software: Read-across from IBM's Q411 Results

Analyst, Rick Sherlund, said, "IBM’s (NYSE: IBM) Q4’11 results showed healthy software growth, with software revenues of $7.65bn (26% of total revenues), up 9% yoy in constant currency, slightly above consensus expectation of 8%. In our software coverage group, Oracle (Nasdaq: ORCL) has the biggest read-across from IBM, given it competes with IBM in database, middleware and business analytics. IBM’s robust software business, along with SAP’s (NYSE: SAP) strong December quarter, suggests the spending environment has not slowed materially, although they did acknowledge some lengthening in the sales cycle also alluded to by Oracle. SAP and IBM, however, did not show the same execution difficulties in the quarter as Oracle."

Further Perspectives on IBM’s Software

IBM had $7.65bn in software revenues, of which $5.2bn was from IBM’s “Key Middleware,” which is of interest to investors as a read-across for other software vendors. Key Middleware grew 11% on a cc basis. Among these products: 1) WebSphere applications server grew 21% in cc. Competes with Oracle’s WebLogic; 2) Information Management grew 9%. Competes with Oracle’s database business; 3) Tivoli up 14%. Systems management competes with CA Inc (NYSE: CA) and BMC Software (NYSE: BMC); 4) Lotus down 3%. Competes with Microsoft (Nasdaq: MSFT); and 5) Rational Software up 4%. Competes with Oracle and Microsoft.

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