Wed, Jul 20, 2011 - Page 10 News List

IBM’s services signings surge, stock rises

Reuters, BOSTON

IBM’s signings of new business at its services division surged 16 percent in the second quarter, trouncing expectations and raising hopes that this year will be a good year for the technology sector.

Analysts said the results marked a strong start to the tech earnings season, with other bellwethers such as Apple Inc, Intel Corp and Microsoft Corp set to report quarterly results in coming days.

“As I look for the balance of the earnings reports this week, I think it’s going to set a pretty good tone,” said Keith Wirtz, chief -investment officer at Fifth Third Asset Management.

IBM shares climbed 2 percent to a record high on the news. The company also raised its full-year profit forecast after second-quarter results beat Wall Street estimates.

“Good service signings reflect that they are capturing their share of the solid IT spending that we’re seeing in the market now,” Edward Jones analyst Josh Olson said.

“IT spending and demand for software and services remains healthy despite all this economic turmoil and businesses continue to invest in efficiency,” he said. “We’re seeing that in these results.”

IBM said on Monday that signings rose to US$14.3 billion during the second quarter, beating Wall Street projections and easing investor concerns after the closely watched number dropped in the first quarter.

Investors believe signings is a key indicator of future profits, but IBM says the focus should be more on total backlog of business, which grew by US$15 billion during the quarter to US$144 billion.

About US$8 billion of the US$15 billion increase in backlog came from the developing economies that IBM defines as “growth markets.”

IBM said developing markets drove top line growth for the company. On a constant-currency basis, revenue leaped 13 percent in growth markets — which includes the BRIC countries of Brazil, Russia, India and China — far outpacing the 3 percent sales growth chalked up in so-called major markets.

The growth in developing countries was led by sales to financial services firms and communications companies.

“We’ve got real momentum in the financial service sector. It’s a strong place for us,” chief financial officer Mark Loughridge said.

He added that business in Europe had improved, with sales in Germany and Italy returning to growth during the quarter.

IBM reported second-quarter profit, excluding items, of US$3.09 per share, beating the average Wall Street forecast of US$3.03, according to Thomson Reuters I/B/E/S.

Revenue rose 12 percent from a year earlier to US$26.67 billion, ahead of the average forecast of US$25.35 billion.

This story has been viewed 1819 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top