IT spending rebound lifts Intel and IBM

The computing industry has benefited this year from an unexpected rebound in business spending on information technology in the developed world and continued rapid growth in the emerging markets, according to figures released by some of the industry’s leading names late on Tuesday.

The earnings reports from Intel and IBM flew in the face of concerns that sagging consumer spending, flatter PC markets and disruption to supply chains from the disaster in Japan would dent a tech recovery.

A revival in business spending, in particular, has been watched as an indicator of the strength of the economic recovery. Underpinning the recovery had been an increasing concentration of IT spending in big, centralised data centres, as businesses shifted applications and services to the internet “cloud” and consumers accessed more of their information through the web, industry executives said.

“We are seeing an explosion of devices that connect to the internet,” Paul Otellini, Intel’s chief executive, told an analyst conference call. The biggest chipmaker reported “softness” in consumer markets in the US and western Europe but said it continued to benefit from the strength of demand from business customers and in emerging markets.

In a sign of the growing importance of centralised computing power, sales of IBM’s mainframe computers rose 42 per cent as it put a new generation of machines on sale.

In another sign of the deeper shift in technology markets, VMware, whose software is used to improve the efficiency of big data centres and which has emerged as one of the hottest companies in the cloud computing market, reported a 33 per cent jump in revenues in the first quarter, pushing its shares up more than 11 per cent.

Intel reported revenues of $12.8bn, up 25 per cent on a year ago and well ahead of an analyst consensus of $11.6bn compiled by Thomson Reuters, lifting its shares 5 per cent.

Profits of 56 cents a share were up 30 per cent on a year ago and beat expectations of 46 cents.

IBM’s revenues rose 8 per cent to $24.6bn and its operating earnings rose 21 per cent to $2.41 a share, compared with expectations of $2.30. But its shares slipped amid concerns for signings of new contracts by its services businesses.

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