International Business Machines Corp. posted first-quarter profit that topped analysts' estimates and said earnings this year will exceed its previous goals, pushing the stock up 2.4 percent.
Net income at the world's biggest computer-services company climbed to $1.65 a share, beating the $1.46 average of estimates compiled by Bloomberg. Armonk, New York-based IBM also said today that full-year profit will advance to at least $8.50 a share, compared with the $8.25 projection announced in February.
Chief Executive Officer Samuel Palmisano said he's confident IBM will withstand a U.S. economic slowdown that has threatened companies' technology budgets. This week Goldman Sachs Group Inc. predicted ``disappointing'' results for U.S. companies, saying they probably will slash their earnings targets through 2008.
``This is telling investors that the bigger, more diversified companies in tech have been able to power their way through,'' said Louis Miscioscia, a New York-based analyst with Cowen & Co. ``Sure, there's spottiness, but it's not across-the- board weakness.'' He has a ``neutral'' rating on the company and said he doesn't own the shares.
The declining U.S. dollar helped boost the value of sales from overseas, where IBM gets about two-thirds of its revenue. The currency fell 7.6 percent against the euro during the quarter. Adjusting for the currency effect, revenue from Europe, Africa and the Middle East rose 4 percent, while the Asia-Pacific region posted a 3 percent increase.
U.S. Sales
U.S. sales rose 6 percent in the first quarter, triple the pace of the previous period. IBM Chief Financial Officer Mark Loughridge said companies in the insurance, banking and telecommunications sectors all helped bolster U.S. orders.
Net income climbed 26 percent to $2.32 billion from $1.84 billion, or $1.21 a share, a year earlier, IBM said today in a statement. Sales rose 11 percent to $24.5 billion, beating the average projection of $23.6 billion.
IBM advanced $2.93 to $123.40 in extended trading after closing at $120.47 on the New York Stock Exchange. The stock has gained 11 percent this year, compared with a 13 percent decline in the Standard & Poor's 500 Information Technology Index.
Without adjusting the currency impact, sales in Europe, the Middle East and Africa surged 16 percent as IBM won contracts with companies such as Transalliance, a French freight hauler. Asia-Pacific revenue climbed 14 percent.
Sales in IBM's technology services unit, which manages computer systems and data centers for corporate clients, climbed 17 percent to $9.68 billion. Revenue from software advanced 14 percent to $4.85 billion.
Feeling Good
``We feel good about the rest of the year,'' Palmisano said in the statement. ``These results reinforce our confidence in IBM's ability to perform well in a dynamic global economy.''
Hardware revenue fell 6.7 percent to $4.22 billion. IBM has shed hardware businesses such as the personal-computer and printing units in the past three years to stem slowing growth.
IBM has cut its dependence on U.S. clients by expanding in faster-growing countries such as Brazil, Russia and China, where sales climbed 26 percent last year. In December, Palmisano said IBM will spend an extra $1.6 billion on sales and marketing in those areas through 2010.
Companies in Asia and Europe may increase spending on technology by 6 percent and 3.9 percent this year, compared with 2.3 percent for their American counterparts, according to Stamford, Connecticut-based researcher Gartner Inc. Economists on average estimate that U.S. economic growth slowed to 0.1 percent in the first quarter, one-sixth the pace of the previous period.
Software Gains
Palmisano, 56, has sought to fuel growth at IBM by wooing customers for software, its most profitable business. The unit's gross margin, or percentage of sales left after production costs, amounted to 85 percent last year, more than double the rate of its largest division, the services business.
The executive also has reduced costs in the company's pension plan. IBM, which had more than 386,000 employees at the end of 2007, has projected savings of $950 million for this year. The redesign is part of Palmisano's plan to boost profit to as much as $11 a share by 2010.
IBM also has pursued billions of dollars in stock buybacks to add to per-share earnings. On Feb. 26, Palmisano announced plans to buy back $12 billion in stock this year. Today the company said the buybacks helped add 13 cents a share to first- quarter profit.
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