IBM ISSUED a 2009 profit outlook that exceeded Wall Street expectations, underscoring the ability of the world’s top technology services firm to weather the global downturn.
The fourth-quarter earnings of IBM also trumped analysts’ expectations, presenting a rare bright spot for the tech industry which has been hit by profit warnings and sweeping job cuts as companies and consumers reduce spending.
Although IBM’s fourth-quarter revenue came in a little shy of expectations, falling 6.4 per cent from a year ago, the company also managed to cut costs by 3-4 per cent. A lower tax rate also helped.
“IBM clearly is watching their expenses closely,” said Andy Miedler, an analyst at Edward Jones, who expects revenue to drop in the mid-single digits on a percentage basis in 2009.
Chief executive Sam Palmisano said IBM was “ahead of pace” on a plan to boost earnings to $10 to $11 per share by 2010. That was more optimistic than its last assessment in October, when the firm only said it was on track toward meeting that goal.
IBM – it competes with the likes of Hewlett-Packard, Microsoft and Oracle – posted a gross profit margin of 47.9 per cent, up 3 percentage points from a year earlier.
Chief financial officer Mark Loughridge said the firm would keep improving margins.
“We will continue our focus on structural changes that reduce our spending levels and improve productivity in 2009.”
Those efforts include standardising services products so they are less costly to deliver to IBM’s customers, which are predominantly among the world’s biggest corporations. The company will also shift staff from headquarters to local offices, where they can work directly with clients.
IBM employs about 4,000 staff in the Republic, and has recently made a number of investments in R&D and other functions.
Globally, IBM has moved to a more profitable revenue mix since 2000, dumping commodity hardware units that made personal computers, printers and PC hard-drives. At the same time it spent $20 billion on acquisitions of software-makers and IT services firms, which tend to do better in tough economic times. – (Reuters)
