IBM posted stronger-than-expected quarterly results last night and raised its 2008 outlook, boosting the shares 2.7 per cent and sending an encouraging signal about technology earnings in the face of a weak US economy.
IBM's technology services, consulting and software revenues were particularly strong and investors expressed relief a day after microchip maker Intel also gave an upbeat outlook for the year.
IBM shares have risen more than 20 per cent since its last earnings report in January on investor optimism the company was better sheltered than rivals from the US economic downturn.
The Armonk, New York-based company gets about two-thirds of its revenue from outside the United States and recurring revenue from services and software contracts accounts for about half its business, providing a buffer from sharp turns in the economy.
First-quarter net income rose 26 per cent to $2.32 billion, or $1.65 per share, beating the average analyst forecast by 20 cents, according to Reuters Estimates. It raised its full-year earnings-per-share forecast to at least $8.50 per share from at least $8.25 in February.
Profit rose from $1.84 billion, or $1.21 per share, a year earlier, while revenue grew 11 per cent to $24.5 billion from $22 billion and topped analysts' average estimate of $23.7 billion.
Currency gains contributed seven percentage points to revenue growth.
IBM's total gross profit margin improved to 41.5 per cent from 40.2 per cent a year earlier. IBM said its global reach and strong recurring revenue and profit contributed to the results.
"We feel good about the rest of the year," Chief Executive Samuel Palmisano said in a statement. IBM Chief Financial Officer Mark Loughridge told analysts on a conference call the second quarter had started well and that IBM could again increase its earnings forecast.
IBM shares rose to $123.70 in extended trading following the earnings report after closing up 2.8 per cent at $120.47.