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IBM Profit Rises 22%, Topping Expectations

International Business Machines's profit leaped 22 percent, blowing past Wall Street's estimates as its bread-and-butter services division continued to thrive despite economic malaise in the United States.

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The technology services giant said it earned $2.76 billion, or $1.98 a share in the second quarter on sales of $26.82 billion, against earnings of $2.26 billion, or $1.50 a share, on sales of $23.77 billion in the same period last year.

A consensus estimate compiled by Thomson Reuters put the company's profit for the quarter at $1.82 a share on $25.919 billion.

"Once again pretty impressive,'' said Zach Rosenstock, an analyst at Wayne Hummer Wealth Management. "They're focusing outside the U.S. to ride through the domestic downturn.''

IBM shares moved about 1 percent lower in extended electronic trading after edging upward earlier in the late session. The stock closed Thursday at $126.64, up 0.56 percent. Rosenstock said enthusiasm for IBM was probably tempered by disappointing results from tech titan Google.

The Armonk, N.Y.-based technology company also raised its profit outlook for 2008, saying it expects to earn at least $8.75 per share on the year, an improvement of 25 cents per share over IBM's previous guidance.

(See the accompanying video for more.)

The large jump reflects IBM's optimism that it will continue to benefit from its broad international penetration and highly profitable blend of services, software and hardware.

"We feel good about our full-year outlook and our 2010 roadmap for $10 to $11 of earnings per share,'' IBM Chairman, President and Chief Executive Officer Sam Palmisano in a statement.

More than half of IBM's business comes from selling services to companies looking to cut costs or better manage their information technology infrastructure. That business has held up remarkably well for IBM despite fears that the economic downturn in the U.S. has started to pinch off corporate spending in other parts of the world.

Due to that stability, many investors view IBM shares as a safe haven in tough economic times. The stock has risen about 17 percent this year, compared with a 15 percent decline in the Dow Jones Industrial index and a 14 percent drop in the Nasdaq Composite Index.

- Wire copy contributed to this report.

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