IBM Profit Easily Tops Forecast, Aided by Weak Dollar
IBMreported a better-than-expected 24 percent rise in preliminary quarterly earnings Monday on strong sales in Asia, Europe and emerging markets, driving its shares up as much as 10 percent and spurring a broader tech rally.
The surprise report ahead of International Business Machines' scheduled earnings release Thursday eased some investor concerns over how much the slowing U.S. economy had hurt the world's largest technology services company.
"This is certainly good news for IBM," said Tim Ghriskey, chief investment officer of Solaris Asset Management, which has about $2 billion in investments. He said he does not own shares in IBM.
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But Ghriskey noted that strength came from outside the United States, and his belief was that domestic demand was still softening. While weakness in home markets did not appear to be causing problems for U.S. multinationals abroad, the scenario could quickly change, he said.
"We are seeing some weakness in housing in Europe, and weak housing is what has hurt the U.S. economy so we could see the same thing beginning to unfold in Europe over the coming months," Ghriskey said.
IBM said its fourth-quarter earnings from continuing operations rose 24 percent to $2.80 a share on a 10 percent increase in revenue to $28.9 billion.
"The broad scope of IBM's global business --- led by strong operational performance in Asia, Europe and emerging countries --- drove these outstanding results," Samuel Palmisano, IBM chairman, president and chief executive officer, said in a statement. "We are on track to achieve our long-term earnings-per-share roadmap objective in 2010."
IBM said full-year diluted earnings per share rose 18 percent to $7.18, including 5 cents per share related to the sale of the Printing Systems Division in the second quarter.
Full-year revenue rose 8 percent to $98.8 billion, including 4 points of currency benefit, it said.
IBM's cash balance at the end of 2007 was more than $16 billion, with strong free cash flow performance, it said. Shares of IBM rose about 7 percent to $104.59 in early market trading.
The strong results spurred gains in other tech shares, such as Intel , which is due to report results Tuesday and whose shares rose 2.9 percent to $22.63.
Hewlett Packard shares jumped 3 percent to $46.37. Oracle and Microsoft shares also edged higher. U.S. stock index futures also rose sharply, signaling that Wall Street will rebound from last week's losses.