New York, Oct. 16 (Reuters): International Business Machines Corp (IBM), the world’s largest computer company, on Wednesday said third-quarter profits rose 36 per cent helped by software and services acquisitions, but its top executive said the technology sector has not yet bounced back.
Armonk, New York-based IBM reported revenues that rose 9 per cent, helped by the weaker dollar, but they were still shy of analyst expectations. Shares fell 3 per cent in after-hours trading.
IBM, which sells everything from mainframes to microchips, backed analysts’ forecasts for the fourth quarter and said that it expects customers to spend more on technology next year. It plans to hire 10,000 people in areas like high-end services and software.
“Although it is too early to say that a rebound is at hand, we are confident that we will benefit from both a pickup in IT spending and an economic recovery,” chief executive Sam Palmisano said.
IBM’s report comes as other technology companies such as Intel Corp and Motorola Inc have reported stronger-than-expected quarters and could temper optimism about the long-awaited rebound, analysts said.
“It’ll put a little bit of a damper on the sector. We’re seeing positive signs but it isn’t producing a broad-based impact on companies the size of IBM,” said SoundView Technology analyst John Jones. He rates the stock an “outperform” and does not own the shares.
IBM shares were trading at $90.01 after hours compared with a close on Wednesday at $92.74 on the New York Stock Exchange.
IBM net profit rises
IBM said net profit rose to $1.8 billion, or $1.02 per share, from $1.3 billion, or 76 cents per share a year earlier.
It said earnings from continuing operations, which excludes the hard-disk drive business it sold last year, rose about 6 per cent to $1.8 billion, or $1.02 cents per share, from $1.7 billion, or 99 cents per share a year earlier.
IBM said revenue increased to $21.5 billion from $19.8 billion a year earlier.
Total revenue was helped by the weaker dollar and acquisitions in the services and software sectors. If the dollar had not declined, revenue would have risen 4 per cent.
“The top line seems to be a little bit weaker than what we were expecting," said Sunil Reddy, portfolio manager for the Fifth Third Technology Fund, which owns IBM shares, referring to sales. “But they made the earnings number.”
Services once again had the spotlight as revenue increased 17 per cent to $10.4 billion, nearly half of IBM’s total revenue. Sales were helped by currency rates and IBM’s acquisition just over a year ago of PricewaterhouseCoopers Consulting.
IBM signed more than $15 billion in new service contracts during the quarter, up from $10.6 billion in the second quarter.