IBM's Q1 earnings jump 26 pct, company increases outlook
Wednesday April 16, 5:42 pm ET
By Brian Bergstein, AP Technology Writer
IBM rides services and software to higher earnings in Q1 and increased 2008 outlook
BOSTON (AP) -- Quarterly profits at IBM Corp. leaped 26 percent and blew past analysts' forecasts Wednesday, with U.S. operations showing surprising strength given the faltering economy. The technology company also increased its earnings forecast for the year.
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In the first quarter, Armonk, N.Y.-based IBM earned $2.32 billion, or $1.65 per share, well ahead of its profit of $1.84 billion, or $1.21 per share, in the same period of 2007.
Revenue rose 11 percent to $24.5 billion, better than the $23.7 billion expected by analysts surveyed by Thomson Financial. The consensus earnings forecast had been $1.45 per share.
IBM's sales numbers were boosted by ongoing weakness in the dollar, since deals done in other currencies now translate into more greenbacks. IBM said its revenue would have risen just 4 percent if not for currency fluctuations.
Even so, this marked the second straight quarter that IBM showed relative immunity to broader economic troubles, especially those in the financial services sector, its largest customer segment.
IBM's chief financial officer, Mark Loughridge, said the performance reflected the company's balance between international and U.S. revenue, and the fact that IBM gets about half its money through contracts with recurring, annuity-like revenue streams. That makes IBM less vulnerable to downward cycles than companies that rely more heavily on selling stuff in individual transactions, which often get postponed when times turn rough.
Reflecting his confidence in that model, Loughridge now expects IBM to earn at least $8.50 per share in 2008. Analysts had been expecting $8.25 per share.
"We just had ... a very powerful quarter here, and I think we have some very optimistic signs," Loughridge told analysts on a conference call.
IBM shares rose $3.30, 2.8 percent, to close at $120.47 before Wednesday's earnings report. The stock surpassed $124 in extended trading, its highest mark since 2002.
One particular bright spot was IBM's improved performance in its home market, which generates 35 percent of its revenue. U.S. sales increased 6 percent.
All of IBM's business units showed increased levels of profitability.
However, the services division's contract signings dropped 2 percent to $10.8 billion. That is a closely watched measure of future revenue. Services revenue actually booked in the quarter rose 17 percent to $14.6 billion.
Software revenue was up 14 percent to $4.8 billion, bolstered by several acquisitions.
Hardware revenue fell 7 percent to $4.2 billion, though the decline would have been 2 percent if not for IBM's 2007 sale of its printing division. The hardware numbers were helped by the launch of a new line of mainframe computers but hurt by weakness in lower-priced server lines. |
