IBM issued a 2009 profit outlook that blew past Wall Street expectations, underscoring the ability of the world's top technology services firm to weather the global downturn and boosting its shares 4 per cent.
The fourth-quarter earnings of International Business Machines Corp also trumped analysts' expectations today, presenting a rare bright spot for the tech industry, which has been hit by profit warnings and sweeping job cuts as companies andconsumers reduce spending.
Although IBM's fourth-quarter revenue came in a little shy of expectations, falling 6.4 per cent from a year ago, the company also managed to cut costs by 3 to 4 per cent. A lower tax rate also helped.
"IBM clearly is watching their expenses closely," said Andy Miedler, an analyst at Edward Jones who expects revenue to drop in the mid-single digits on a percentage basis in 2009.
"IBM can't control its revenue in this environment so they're focusing on cost control,” Miedler said.
Chief Executive Samuel Palmisano said IBM was "ahead of pace" on a plan to boost earnings to $10 to $11 per share by 2010. That was more optimistic than its last assessment in October, when the firm said only it was on track toward meeting that goal.
The upbeat projections contrasted with more sombre comments from other industry giants that have announced layoffs and warned this year's business outlook was grim.
While IBM is cutting jobs that add to overhead, it is hiring more consultants, sales staff and other workers that directly bring in revenue.
IBM - which competes with the likes of Hewlett-Packard, Microsoft and Oracle - posted a gross profit margin of 47.9 per cent, up 3 percentage points from a year earlier. Chief financial officer Mark Loughridge said the firm will keep improving margins.
"We will continue our focus on structural changes that reduce our spending levels and improve productivity in 2009," Mr Loughridge said on a conference call.
Reuters