IBM raises earnings forecast
IBM raised its full-year earnings target, even as it posted a quarterly revenue shortfall, reflecting its ability to manage costs as global technology spending sputters.
International Business Machines, a bellwether for the IT industry because of its global span and breadth of businesses, now expects full-year earnings per share - excluding items - of at least $15.10, versus at least $15.00 previously.
Unlike other companies, IBM said it had seen a strong June and chief financial officer Mark Loughridge said he was "pretty confident going into the next quarter."
Despite Mr Loughridge's confidence, IBM - like rivals Hewlett-Packard and Oracle - continues to grapple with declining corporate budgets as the European crisis tightens spending and emerging market growth decelerates.
The company known as Big Blue has been compensating by shifting its focus from hardware to higher-margin services and software over the past decade but software revenue was flat in the quarter and services was down 2 per cent.
IBM said its revenue fell 3 per cent to $25.8 billion in the quarter, missing average expectations of $26.27 billion.
It said it took a $1 billion hit because of a weaker euro and other foreign exchange headwinds that translate into fewer dollars.
IBM generates about 60 per cent of its revenue outside the US.
While revenue in the Americas declined by only 1 per cent, the drop in Europe, Middle East and Africa was 9 per cent. The Asia-Pacific region grew a mere 2 per cent.
Mr Loughridge told analysts on a conference call after IBM reported earnings that the company foresaw a $2 billion hit from foreign currency factors in the second half.
IBM said second-quarter earnings per share, excluding items, was $3.51, beating average analysts' estimate of $3.43.
A number of companies such as Cisco Systems have cautioned that tech spending may slow down in the second half of 2012 and companies such as Advanced Micro Devices have warned that earnings would suffer.
IBM shares rose 2.5 per cent to $193 in extended trade, from their New York Stock Exchange close of $188.25. The stock has fallen 11 per cent in the three months since it reported a quarterly revenue shortfall when it last released earnings.
Those results raised concerns among some investors that the stock had gotten ahead of itself after hitting a record high of $210.69 on April 3rd.
The broader Nasdaq composite index has fallen 4 per cent over the past three months.