IBM

The software side is now the engine. Software revenue hit 7.8 billion dollars, up 5 percent, with Red Hat up 11 percent and the data business up 19 percent. The Power and Storage hardware group grew a record 37 percent and is sitting on nearly 500 million dollars of orders it has not filled yet.

IBM pulled in 7.8 billion dollars of cash from operations in the first half, up 1.7 billion dollars from last year, and handed 1.6 billion dollars back to shareholders in dividends this quarter alone. It just raised the quarterly payout to 1 dollar and 69 cents per share and still expects free cash flow to climb about 1 billion dollars this year.

The famous mainframe business fell off a cliff. IBM Z revenue dropped 42 percent, dragging the whole Infrastructure segment down 7 percent to 3.8 billion dollars. Total revenue crawled up just 1 percent to 17.2 billion dollars, so one weak product cycle can still stall the entire company.

Consulting revenue was flat at 5.3 billion dollars, and profits are thinner than they look. Gross margin slipped to 57.7 percent and pre-tax income fell 5 percent. IBM also spent 10.5 billion dollars on acquisitions this year, cutting its cash pile by 6.3 billion dollars, so it needs those deals to pay off.