IBM earnings beat forecast

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By The Telegraph Online
  • Published 20.07.05

San Francisco, July 19 (Reuters): IBM, the world’s largest computer company, has posted better-than-expected quarterly earnings after a rebound in its services and software businesses.

Second-quarter earnings, excluding the effects of a job-cut plan, the sale of its PC business and a legal settlement with Microsoft, climbed about 5 per cent, and results in most of IBM’s businesses beat investor expectations.

Analysts said the report marked a rapid turnaround from the earnings shortfall that IBM had posted in the first quarter, which called into question the health of global technology spending generally and led to a sharp drop in IBM’s stock.

“IBM returned to form in this quarter,” chairman and chief executive Sam Palmisano said in a statement.

Chief financial officer Mark Loughridge told analysts after the report that Wall Street expectations for the second half “remain reasonable”. Analysts, on average, are looking for third-quarter profits, excluding one-time items, to decline 4 per cent and for fourth-quarter profits to grow by 2 per cent.

Excluding charges and gains, IBM’s second-quarter earnings rose to $1.82 billion, or $1.12 per diluted share, from $1.74 billion, or $1.01 per share, which was restated to include the effect of accounting for employee stock option expenses.

Revenue for IBM, which is based in Armonk, New York, fell 4 per cent to $22.3 billion. The results include just one month of sales from its PC business, which it sold to China’s Lenovo Group in May. Excluding the sold-off PC business, sales rose 6 per cent.

Analysts forecasts ranged from $21.61 billion ? a drop of 6.6 per cent ? to $24.83 billion, or growth of 7.25 per cent.

The global services unit, accounting for roughly half of IBM’s total revenue, showed solid growth in revenue and a surge in signings of new contracts. Services revenue rose 6 per cent to $12.0 billion. IBM signed services deals worth $14.6 billion, up from $10 billion in the first quarter.

“Clearly things have rebounded,” Pacific Crest Securities analyst Richard Petersen said, adding that he expected several analysts to upgrade their ratings on the stock as a result. “I think that things have done a little better than rebounded.”