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IBM Targets 2008 Profit Above Expectations

SAN FRANCISCO — IBM on Jan. 17 forecast 2008 earnings well ahead of Wall Street expectations after results showing a strong international performance, and its shares rose 5 percent. The world’s largest computer services company forecast 2008 earnings would rise 15 percent to 16 percent, hitting $8.20 to $8.30 per share, while Wall Street analysts had expected $7.91 […]

Written By: Channel Insider Staff

Jan 18, 2008

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SAN FRANCISCO — IBM on Jan. 17 forecast 2008 earnings well ahead of Wall Street expectations after results showing a strong international performance, and its shares rose 5 percent.

The world’s largest computer services company forecast 2008 earnings would rise 15 percent to 16 percent, hitting $8.20 to $8.30 per share, while Wall Street analysts had expected $7.91 on average, according to Reuters Estimates.

"That is above the Street consensus. They are going to save $800 million from pension costs, year-over-year. But having said that, that is a good forecast." said Peter Misek, an analyst at Canaccord Adams.

"International is absolutely the saving grace of these guys. Right now I would not want to be a big tech company that was exposed to the U.S. consumer or heavily exposed to U.S. enterprises," he added.

Building on a strong preliminary earnings report earlier in the week, IBM said fourth-quarter net income advanced to $3.95 billion, or $2.80 per share, from $3.46 billion, or $2.31 per share, a year earlier. Revenue rose to $28.9 billion from $26.3 billion.

Revenue from the Americas rose 5 percent, compared with strong gains in other regions, and computer hardware sales declined.

International Business Machines Corp said in preliminary results on Monday that earnings per share from continuing operations had jumped above analysts’ average expectations, driven by strength in Asia, Europe and emerging countries. IBM said it was on track to reach its 2010 growth target, which calls for earnings per share of $11.

Total revenue from the company’s global services business rose 17 percent. Business services, focused on consulting, had a revenue gain of 17 percent to $4.93 billion, and revenue from technology services, which includes outsourcing and computer maintenance, advanced 16 percent to $10 billion.

Software revenue rose 12 percent to $6.26 billion, and the unit’s gross profit margin increased to 87.1 percent from 86.5 percent. Revenue from computer hardware including server computers, data storage gear and microchips, fell 3.9 percent to $6.8 billion.

IBM’s Monday announcement sent its stock sharply higher and eased concerns that a slowing U.S. economy was crimping spending on technology, until recently a safe haven for investors fleeing housing, banking and consumer-discretionary stocks.

IBM shares, down 17 percent before Monday’s announcement from a 52-week high on October 11, have added 5 percent this week and trade at about 13 times estimated 2008 earnings per share, about the same as rival Hewlett-Packard.

Shares rose 4.9 percent to $106.01 in after-hours trade from a close of $101.10 on the New York Stock Exchange.

IBM Targets 2008 Profit Above Expectations

Channel Insider Staff

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