Thread: IBM's Net Rises 13%

APRIL 20, 2010.

IBM's Net Rises 13%

By SPENCER E. ANTE

International Business Machines Corp. showed further evidence of a recovery in technology spending, posting a 13% rise in profit for the first quarter driven by growth in the company's software business and emerging markets.

The wide-ranging conglomerate said it is seeing broad improvement in its business lines and raised its outlook for the full year. The outlook reflects some optimism about the business environment and the company's long-running shift into higher-margin activities and faster-growing areas of the globe.

"We are in more of a growth mode," IBM Chief Financial Officer Mark Loughridge said on a conference call. "I feel like we have a good hand going into the second quarter."

The Armonk, N.Y., company posted a profit of $2.6 billion, or $1.97 a share, up from $2.3 billion, or $1.70 a share, a year earlier. Revenue climbed 5.3%, to $22.86 billion, but was flat if the effects of changes in currencies are stripped out.

IBM executives said the company's revenue would rise in the second quarter even after adjusting for currency changes. IBM also boosted its full-year profit outlook to $11.20 a share, up from a previous forecast of at least $11 a share.

The first quarter marked the first time since 2008 that IBM has posted two consecutive quarters of revenue growth. The company's most glaring weak spot was anemic contract signings in its global services unit, which fell 2% to $12.3 billion. The company said it signed 13 services contracts worth at least $100 million, down from 16 such contracts a year ago and 22 in the fourth quarter.

A perennial challenge for IBM has been to get the company firing on all cylinders at the same time. While IBM's software business increased a strong 11% and its hardware business expanded by 5%, the company's global business services line saw no growth.

Associated Press
.Thanks to a jump in consulting project signings this quarter, though, IBM said it expects its services business to return to modest growth in the second quarter.

"We have a very good deal list with good odds, so there's no reason we shouldn't be growing signings at a reasonable level," Mr. Loughridge said. Analysts also expect the company to get a boost when a new line of high-end server computers ships later this year.

Under Chief Executive Samuel Palmisano, IBM has shed low-margin assets such as its personal computer division while beefing up in higher-margin software and services businesses. In the first quarter, IBM's software group accounted for $2.1 billion, or 58%, of the company's pretax income.

The company has been expanding aggressively overseas to capture business in fast-growing emerging markets such as Brazil and China. Revenues from what the company calls its growth markets were up 20% in the first quarter from a year earlier, compared with 2% growth in the Americas. Such markets now account for 19% of IBM's total revenue.

Write to John Kell at john.kell@dowjones.com

http://online.wsj.com/article/SB1000142 ... EFTTopNews

Too bad most of those jobs are off shore.

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