International Business Machines Corp's profit rose in the first quarter after services made up more than half the company's revenue for the first time, lifted by the purchase of PricewaterhouseCoopers LLP's business-consulting unit.
Net income increased to US$1.39 billion, or US$0.79 a share, compared with profit from continuing operations of US$1.28 billion, or US$0.73, in the year-earlier period. IBM sold its hard disk drive unit last year and excluded that from the year-earlier results, the company said in a statement.
Sales rose more than analysts expected, to US$20.1 billion, led by a 24 percent gain in its business providing services such as running Web sites and computer help desks. IBM, the world's biggest seller of computers and related services, has added new machines and services and made acquisitions to fill gaps in its lineup.
"I am not surprised by the continued growth in services," said Marty Shagrin, who helps manage US$50 billion for KeyCorp's Victory Capital Management in Cleveland, including 3.5 million IBM shares. "I don't see that trend stopping."
Analysts on average projected profit of US$0.80 a share on sales of US$19.9 billion, according to Thomson Financial. The forecasts were off because of differences in the estimated number of outstanding shares, Chief Financial Officer John Joyce said.
IBM shares yesterday rose US$0.33 to US$80.40 in extended trading after the report was issued. They had gained US$1.32 as of 4pm in New York Stock Exchange composite trading and have risen 3.3 percent this year.
Analysts polled by Thomson projected an average profit of US$4.32 a share on sales of US$87.8 billion.
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