IBM’s third-quarter earnings jumped 18 per cent from a year earlier, slightly surpassing Wall Street expectations, as the company’s diversification plan continued to yield results.
The Armonk, New York-based company reported $23.6bn revenue, $200m more than had been expected. The company also raised its full-year forecast, striking an optimistic note while looking to future quarters.
”We had a very strong quarter with improved revenue trends,” IBM chief financial officer Mark Loughridge said in a statement. “We expect to return to revenue growth in the fourth quarter.”
Mr Loughridge said believes the overall economy had stabilised and that corporate technology spending was picking back up. “What we see more broadly is some stabilisation in the economic environment,” he said. “We’re looking forward to a good year.”
IBM expects full-year earnings per share of at least $9.85, up from a previous estimate of $9.70 per share last quarter and $9.20 earlier in the year.
However total revenues were down 5 per cent from a year earlier after currency adjustments, as business spending on technology continues a slow recovery from the recession.
IBM also reported a drop in signed services contracts. The contracts, which are an indicator of future business, fell 7 percent. Software revenues were $5.1bn, the same as a year ago when adjusting for currency.
The company is in the midst of a long term transition toward more profitable lines of business such as software and services. The years-long effort has already seen IBM eliminate it shard disk drive, personal computer and printing units. The strategy has allowed IBM to expanded its gross margins for 20 of the past 21 quarters.
This has seen IBM diversify into a range of new sectors, including analytics, business intelligence and technology support.
“We continued to invest for growth in areas where clients see potential for value creation including Smarter Planet solutions, cloud computing and advanced business analytics,” said Mr Loughridge.
IBM emphasised the improved performance of its “branded middleware”, a group of products that include WebSphere, Information Management, Tivoli and Lotus, and grew revenues 5 percent to $2.9bn from a year earlier.
Shares of IBM had risen 24 per cent during the previous quarter as investors hoped technology companies would lead the way out of the recession. However IBM shares were down as much as 4.2 per cent in extended trading on Thursday evening.
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