News
IBM First-Quarter Earnings Up 22 Percent
The residual effects of sweeping cost cuts helped first-quarter earnings at
International Business Machines Corp. increase 22 percent and beat analysts'
expectations Tuesday despite minor revenue growth.
In the first three months of the year, IBM earned $1.71 billion, $1.08 per
share, on revenue of $20.7 billion. Wall Street's consensus estimates were for
earnings of $1.05 a share and $20.7 billion in revenue, according to Thomson
Financial.
In the same period of 2005, IBM's net income was $1.40 billion, 84 cents per
share, with revenue of $22.9 billion. But those results included IBM's personal-computer
division, since sold to Lenovo Group Ltd.
Excluding PC sales, the comparable figures from last year were profit of $1.37
billion, 82 cents per share, and revenue of $20.6 billion. While that amounted
to virtually no change in revenue year over year, IBM said it would have seen
4 percent growth if not for the effects of currency fluctuations.
The report was released after IBM shares gained $1.67, 2 percent, to close
at $83.31 on the New York Stock Exchange. In extended trading, the stock moved
lower.
The earnings report comes amid questions over the health of IBM's technology
services business, which provides more than half of Big Blue's revenue.
With increased competition from less-expensive providers around the world,
IBM's services growth has been sluggish in recent quarters. Profit gains have
been achieved largely through expense cuts and shifts in labor from costlier
markets such as Europe to places like India.
In the first quarter of 2006, the services division showed a 1 percent drop
in revenue, though IBM said it would have been a 3 percent gain without currency
fluctuations.
The group landed $11.4 billion in services contracts in the quarter. While
that will not be realized as revenue until future periods, the statistic is
considered a leading indicator of IBM's services strength.
IBM did not immediately address analysts' full-year forecast of $5.81 in earnings
per share and revenue of $90.6 billion.