DOW JONES NEWSWIRES
International Business Machines Corp.'s (IBM) third-quarter
profit jumped 14% as better margins more than offset lower
revenue.
While the tech giant again lifted its full-year profit target as
results topped analysts' estimates, shares fell 3.7% after-hours to
$123.11. The stock is up by about half this year.
IBM now sees 2009 earnings of at least $9.85 a share, up 15
cents. Wall Street most recently expected earnings of $9.78. IBM
continued to see earnings "ahead of pace" for its 2010 outlook of
$10 to $11 a share.
For the fourth quarter, Chief Financial Officer Mark Loughridge
said the company expected to post revenue growth. The mean estimate
of analysts surveyed by Thomson Reuters was a 1% drop to $26.79
billion. Chairman and Chief Executive Samuel J. Palmisano added IBM
saw improved revenue trends, while notching share gains in software
and hardware.
The tech bellwether's shift in focus to software and its giant
services business on advising government agencies and companies on
their fundamental operations, and away from hardware, has paid
off.
Tech demand has held up well for much of the recession, and a
number of companies have said they see business improving in the
second half of the year.
Big Blue reported earnings of $3.21 billion, or $2.40 a share,
up from $2.82 billion, or $2.04 a share, a year earlier. Revenue
declined 6.9% to $23.6 billion, two percentage points of which was
due to currency changes.
Analysts polled by Thomson Reuters expected per-share earnings
of $2.38 on revenue of $23.4 billion.
Gross margin jumped to 45.1% from 43.3%, led by improved margins
in services and software.
Revenue in the Americas, IBM's biggest market, fell 5%, falling
4% excluding currency fluctuations. Sales in its Europe and Middle
Eastern region declined 12% but was essentially flat in Asia.
Total global services revenue decreased 7%, as global technology
services fell 4.4% to $9.4 billion, or 2% excluding currency
fluctuations, while global business services dropped 11% to $4.3
billion. Revenue from the software segment were down 3%, or flat
when adjusted for currency.
IBM's services contracts declined 7% to $11.8 billion. In
addition, IBM said it signed three deals in the first two days of
October with a total value of about $1 billion.
On Tuesday, another tech bellwether, computer-chip maker Intel
Corp. (INTC) provided more evidence that the tech sector recovery
will continue through the holiday shopping season as the company
gave a strong view for the rest of the year, even as third-quarter
profits slid 7.8%.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com