IBM sees better profit despite tech sales slump

Oct 15, 2009 By JORDAN ROBERTSON , AP Technology Writer
FILE - In this Nov. 24, 2008 file photo, an IBM office is shown in New York. IBM is expected to report quarterly earnings after market close Thursday, Oct. 15, 2009. (AP Photo/Mark Lennihan, file)

(AP) -- IBM Corp. is a rare example of a company that has kept boosting profit and jacking up its guidance even as the recession has sapped its sales.

The ability comes from IBM's transformation from a hardware company on the brink of collapse in the 1990s to a one-stop technology shop that rivals are trying to emulate.

IBM now focuses on outsourcing and other services that save clients money are more profitable than selling hardware. A flurry of recent acquisitions from Hewlett-Packard Co., Inc., Corp. and Corp. have thrust those companies deeper into IBM's turf.

IBM's latest results, reported Thursday, show why its business model might be attractive to rivals.

Revenue dropped 7 percent in the July-September quarter, but profit jumped 14 percent and IBM raised its 2009 forecast for the second time.

IBM expects at least $9.85 per share in profit in 2009, ahead of analysts' average forecast of $9.78 per share, according to Thomson Reuters. IBM had raised its guidance before, in July, to at least $9.70 per share.

Still, shares fell 3.7 percent in extended trading after closing the regular session at $127.98, down 37 cents. Some investors were apparently disappointed the increase wasn't bigger.

"A lot of us thought you might get even better than this," said Peter Misek, an analyst with Canaccord Adams. "But these results are solid."

IBM's in the quarter ended Sept. 30 was $3.2 billion, or $2.40 per share, versus $2.8 billion, or $2.04 per share, a year ago. Analysts expected $2.38 per share.

Sales were $23.6 billion, slightly better than the $23.4 billion expected by analysts polled by Thomson Reuters. Revenue would have been down 5 percent instead of 7 percent if it were not for currency fluctuations.

The value of services contracts that IBM signed in the quarter was $11.8 billion, a decline of 7 percent from the same period in 2008.

While IBM makes most of its money from services and software, still makes up nearly a fifth of its revenue. Mark Loughridge, IBM's chief financial officer, said in an interview that market share gains in servers at the expense of the world's No. 4 server maker, Sun Microsystems Inc., were a significant help in the quarter. IBM has exploited uncertainty about Oracle Corp.'s proposed $7.4 billion acquisition of Sun to steal away customers.

IBM's numbers show that corporations are still reluctant to spend on some kinds of technology. Accenture, an rival in consulting, and Corp., which makes most of the world's computer microprocessors, have recently said a recovery might not happen until next year.

©2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Explore further: BlackBerry courts iPhone users with cash

add to favorites email to friend print save as pdf

Related Stories

IBM stumbles on 1Q sales dip; profit beats Street

Apr 20, 2009

(AP) -- IBM Corp.'s first-quarter results slipped as all its major business units suffered declines, but the company backed its bullish outlook for 2009 on Monday, reflecting its belief that a broad mix of services and software ...

IBM sees better profits for 2009 (Update)

Jul 16, 2009

(AP) -- IBM Corp. has proved a rare animal in the recession. Like everyone else, its sales have been hurt. Profit margins, though, have only gotten better and better, and on Thursday IBM ramped up its full-year earnings ...

Soft PC sales send Microsoft profit down 29 pct

Jul 23, 2009

(AP) -- Microsoft Corp. said Thursday its profit in the last quarter plunged 29 percent because of weak computer sales, ending a fiscal year in which the software maker's revenue fell for the first time since ...

Oracle tops forecasts despite sales, profit dip

Jun 23, 2009

(AP) -- Software maker Oracle Corp.'s results topped Wall Street's forecast for the latest quarter Tuesday, despite a 5 percent drop in sales and a 7 percent decline in profit.

Recommended for you

BlackBerry courts iPhone users with cash

11 hours ago

Canadian smartphone maker BlackBerry is wooing Apple customers with a cash offer for trade-ins of iPhones for its new square-screened, keyboard-equipped Passport.

HP earnings show continued struggle

12 hours ago

Venerable tech giant Hewlett-Packard has been struggling for three years to turn its business around. Its latest earnings show it still has more work ahead.

Apple market value hits $700 bn

18 hours ago

A rise in Apple shares Tuesday pushed the market value of the trend-setting US tech icon above $700 billion, becoming the first company to hit that milestone.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.