IBM, a barometer of trends in the computing business, delivered a solid quarterly performance on Monday that pointed to modest if uneven improvement in the corporate technology sector.
The company, the world's largest computer maker and technology services supplier, reported third-quarter profit that exceeded Wall Street's expectations and revenue that met analysts' estimates. Growth was strong in the US, and in emerging markets like China, India and Russia, while Europe lagged. Hardware sales were particularly robust, led by sales of mainframes and smaller data-serving computers powered by personal computer microprocessors.
The company expects information technology spending to increase worldwide by 4 percent to 5 percent this year, the best gain since 2000, Mark Loughridge, the chief financial officer, told analysts in a conference call. IBM, he added, is gaining market share against rivals in several major markets and is on track to meet its financial targets of double-digit growth in earnings for the year.
Recovery `on track'
Daniel Niles, chief executive of Neuberger Berman Technology Management, a fund management company in San Francisco, said, "At least for right now, the technology recovery seems to be on track, given what IBM is saying."
Signings of new services contracts were lower than analysts expected, raising questions about growth prospects of a business that now accounts for roughly half of IBM's revenue. Yet overall, investors and analysts were impressed.
The company, which is based in Armonk, New York, reported third-quarter earnings of US$1.06 a share, compared with US$1.02 in the year-earlier quarter. But the third quarter this year included a US$320 million charge, or US$0.11 a share, to pay for the partial settlement of legal claims against the company's pension fund. The settlement, announced on Sept. 29, involves a case that asserts that the IBM pension plan, like similar programs, discriminates against older workers.
Revenue grew 9 percent in the quarter to US$23.4 billion, in line with analysts' expectations. Without the lift from currency gains, revenue rose 5 percent during the quarter. Sales rose 8 percent in the US and the rest of the Americas, 7 percent in constant currency, the strongest quarterly advance in the region in three years, Loughridge noted.
Hardware sales
Hardware sales increased 12 percent, or 9 percent adjusted for currency gains, to US$7.5 billion. A star in the group was mainframe computers, a product once thought to be in inevitable decline; revenue increased 12 percent from the year-earlier quarter.
Services revenue grew 10 percent, or 5 percent excluding currency gains, to US$11.4 billion. But the impressive showing was clouded somewhat by lower-than-expected signing of new contracts during the quarter.
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