IBM wows Wall St with 12 per cent profit jump
Friday 17 July 2009
IBM blew away second-quarter profit projections and jacked up its full-year earnings forecast today, a rare sign of confidence from a major corporation in the recession.
Even though IBM's sales are slipping, the results demonstrate the technology company's belief that it can continue wringing out more profit from its services and software divisions. IBM has been relentless in cutting costs by automating tasks and shifting labor to cheaper locales, while protecting prices.
The 2009 profit forecast went to at least $9.70 (£5.94) per share, from $9.20 (£5.64) per share, a target that IBM set in January.
"Big Blue appears recession-proof," Annex Research analyst Bob Djurdjevic wrote in an email.
IBM said profit in the latest quarter, which ended June 30, rose 12 per cent to $3.1 billion (£1.9 billion), or $2.32 (£1.42) per share. Analysts expected $2.02 (£1.23) per share.
Meanwhile, sales dropped 13 per cent to $23.25 billion (£14.5 billion), lower than the $23.59 billion (£14.25 billion) predicted by analysts polled by Thomson Reuters. Sales would have been down 7 per cent without currency fluctuations.
"We are optimistic about how IBM is positioned to make the most of current growth opportunities as well as those that emerge as the economy recovers," IBM's chairman and chief executive, Sam Palmisano, said in a statement.
Shares of Armonk, New York-based IBM rose $1.55 (95p), 1.4 per cent, to $112.19 (£68.77) in extended trading after the earnings report. The stock had closed regular trading at $110.64 (£67.81), up 3.2 per cent on the day.
IBM's results don't mean overall corporate technology spending has rebounded.
Consulting and outsourcing rival Accenture Ltd. says there are fewer opportunities in higher-end services. Dell this week said it still is finding it hard to sell PCs to corporations, which are holding on to machines longer than normal. Even chip maker Intel, which this week reported stronger-than-expected earnings and guidance, said large companies haven't loosened their pursestrings yet.
IBM's report showed that its services and software divisions were the stars, while hardware lagged. Pre-tax income rose 23 per cent in services and 24 per cent in software. IBM says those divisions can prosper in down times because they help make customers more efficient.
IBM's gross profit margin widended to 45.5 per cent of revenue, from 43.2 per cent in the same period last year. That reflects the profit on each dollar of revenue once the cost of making a company's products is stripped out.
Life & Style blogs
'Cheeky' Nando's under fire for apparently coming onto a customer on Twitter
10 ways we damage our teeth – without realising
Facebook Messenger sends 'creepily' precise location data, as revealed by Marauders Map Chrome extension
What do the emoji on Snapchat mean?
iPhone 'effective power' text: how to be safe from iOS bug that lets people crash your phone
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
Australian man punched in the face for defending Muslim women from abuse on train
A nation of inequality: How the UK is failing to feed its most vulnerable people
EU referendum: David Cameron to deny EU migrants and under-18s the chance to vote
- 1 10 ways we damage our teeth – without realising
- 2 There is something wrong but very right about this Bible illustration
- 3 iPhone 'effective power' text: how to be safe from iOS bug that lets people crash your phone
- 4 Photo of wedding guest proposing to girlfriend in front of bride and groom goes viral
- 5 Charlie Charlie Challenge explained: it's just gravity — not a Mexican demon being summoned
iJobs Gadgets & Tech
£35000 - £45000 per annum: Recruitment Genius: They are the go-to company for ...
£20 - 28k + Benefits: Guru Careers: We are seeking a Graduate Software Develop...
Negotiable: Recruitment Genius: A Digital Web Designer is required to join a f...
£35-40k (DOE) + Benefits: Guru Careers: We are seeking a Marketing Communicati...