IBM rises as profit tops estimates on mainframe sales
Published 20/01/2011 | 05:00
INTERNATIONAL Business Machines (IBM) climbed the most in six months in New York trading, extending yesterday's record, after reporting fourth-quarter profit and sales that topped analysts' estimates.
Per-share profit rose to $4.18 (€3.10), the Armonk, New York-based company said yesterday in a statement, beating the $4.08 average estimate of analysts surveyed by Bloomberg.
Sales climbed to $29bn as hardware revenue got a boost from IBM's newest mainframe and companies bought more analytics software.
Services signings jumped 18pc to $22.1bn, the first increase in a year. Full-year profit this year, excluding some costs, will be at least $13 a share, the company said.
IBM climbed $3.99, or 2.7pc, to $154.64 in New York Stock Exchange composite trading, the biggest intraday gain since July 7. The stock rose 12pc last year.
"Investors are encouraged by strengths in the signings this quarter," said Deutsche Bank analyst Chris Whitmore, who rates the shares "buy" and doesn't own them. "They exited the year well. There's not a lot to pick on this quarter."
The company is the second technology bellwether whose earnings suggest an uptick in information-technology spending. Last week, Intel, the world's biggest chipmaker, forecast first-quarter sales that may top estimates, as companies buy more computers and servers.
Fourth-quarter hardware revenue climbed 21pc to $6.3bn, as the mainframe introduced in July helped boost sales in that product category by almost 70pc. Sales from the software division gained 7pc to $7bn.
Net income for the quarter increased 9.2pc to $5.26bn from $4.81bn, or $3.59 a share, a year earlier. Analysts estimated sales of $28.3bn on average.
Revenue from growth markets, such as Brazil, India and China, climbed 15pc. Sales from the regions will make up at least a quarter of revenue by 2015, the company said in May, up from 21pc last year.
Starting with the 2011 full-year forecast, IBM is moving to an operating reporting format, which excludes acquisition and some retirement costs.
Per-share earnings on that basis will be at least $20 in 2015, the company said, reiterating its forecast from May. Revenue will increase by about $20bn in that period, the company said.
Reporting operating earnings provides more transparency and a better comparison to other technology companies, Chief Financial Officer Mark Loughridge said on a conference call yesterday.
CEO Sam Palmisano is investing in analytics software and cloud computing, which the company forecasts will become $16bn and $3bn businesses respectively by 2015. Smarter Planet, Mr Palmisano's initiative to digitally monitor anything from roads to hospitals to make them more efficient, should grow into a $10bn business.
Mr Palmisano also plans to spend about $20bn on acquisitions through 2015. He announced 15 deals last year, including storage-computer maker Netezza for $1.7bn. (Bloomberg)