IBM New Zealand’s profit and revenue falls

Spin-off of Lenovo was factor in lower result, MD says

IBM New Zealand had a “mixed” year in 2006 after focusing on consolidation, says managing director Katrina Troughton.

Before-tax profit was $29 million, down $28 million from $57 million in 2005 and revenue was $358 million, down $45 million from $403 million. However, the 2005 results included four months of revenue from the PC business, since sold to Lenovo, and a one-off profit gain from the sale of the IBM centre in Petone. Several large services contracts also concluded during the year.

Troughton, however, is not prepared to reveal those figures. “I’m not able to discuss [them] at that level,” she says.

“Overall, 2006 was a year of consolidation as IBM New Zealand adjusted its business strategy to focus on building up the high-value, more profitable parts of the business, including software, services and solutions, while at the same time moving away from commodity business.”

The company recorded double-digit growth in both software sales and strategic outsourcing.

Troughton notes that globally, software now contributes up to 40% to IBM’s bottom line.

The double-digit growth in software was driven by strong demand for portals and service oriented architecture (SOA), she says.

“Clients want far more on-demand and flexible solutions,” Troughton says. “They need to be able to change much faster.”

The growth in strategic outsourcing came through a combination of signing new clients and expanding existing client business, including Goodman Fielder, Westpac and Baycorp. New contracts included network management and service delivery for the Government Shared Network, the installation of a wireless network at Northland Polytechnic, and voice telephony at Tegel.

IBM also won services and consulting contracts at the Earthquake Commission, and with a major bank and a company in the electricity sector. Troughton won’t name them because of commercial confidentiality.

The total value of services contracts grew by more than 140% year-on-year, and there was a 30%-plus increase in sales to the public sector. “I’m very confident going forward,” she says.

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