IBM Profit Forecast Tops Analysts’ Estimates
By Katie Hoffmann
Jan. 19 (Bloomberg) -- International Business Machines Corp., the world’s largest computer-services provider, said full-year profit will exceed its earlier target, helped by the rebounding economy.
Profit in 2010 will be at least $11 a share, the Armonk, New York-based company said today in a statement. IBM set a goal in May 2007 of posting earnings of $10 to $11 this year.
Companies are resuming spending on technology, particularly hardware, which the recession hurt most, said Rob Cihra, an analyst at Caris & Co. in New York. That improvement, combined with IBM’s focus on the more profitable software and services divisions, has helped the company boost earnings, he said.
“IBM’s a relatively slow-moving ship, but directionally things are getting better,” said Cihra, who rates the shares “above average” and doesn’t own them. “Even through what just turned out to be one of the worst tech years in memory, it’s remarkable how well IBM’s earnings held.”
IBM was little changed in late trading after climbing $2.36 to $134.14 at 4 p.m. in New York Stock Exchange composite trading. The shares gained 56 percent last year.
Analysts projected 2010 profit of $10.90 a share, based on the average of estimates compiled by Bloomberg.
IBM follows Intel Corp. as the second technology bellwether in a week to release a forecast that topped estimates. Global information-technology spending will climb 8.1 percent this year, according to a report this month from Forrester Research Inc.
Fourth-Quarter Results
IBM’s fourth-quarter profit amounted to $4.81 billion, or $3.59 a share, compared with $4.43 billion, or $3.27, a year earlier. Analysts projected $3.47 a share. Sales advanced 0.8 percent to $27.2 billion.
Intel, the world’s largest chipmaker, forecast first-quarter sales of about $9.7 billion, topping analysts’ estimate, as consumers and businesses resume spending on laptops and other technology.
Google Inc., the most popular search engine, will report earnings Jan. 21 and Microsoft Corp., the world’s largest software-maker, is set to post results Jan. 28.
IBM, once the largest computer company, has spent the past decade selling off what executives call “commoditized” hardware units, such as the personal-computer group, to invest in the more profitable businesses of software and services.
The two divisions have helped expand the gross profit margin, or the percentage of profit after costs, to 48.3 percent in the fourth quarter from 47.9 percent a year earlier and from 38.8 percent at the end of 2002, the year Chief Executive Officer Sam Palmisano took hold of the company. Margins have expanded for nine straight quarters.
IBM has further expanded margins by lowering costs, including shifting work overseas and standardizing software across different services.
To contact the reporter on this story: Katie Hoffmann in New York at khoffmann4@bloomberg.net
Last Updated: January 19, 2010 16:10 EST |
