The giant company provides a gauge of business investment trends because it is the largest supplier of computing technology — hardware, software and services — to corporations. I.B.M.’s performance echoes the reassuring results in recent weeks from a handful of corporate technology companies, like Oracle and Salesforce.com, whose quarters end in July or August instead of September.
Corporations, analysts note, are holding ample cash reserves and continue to spend on technology to cut costs and lift productivity, despite uncertain economic prospects in many countries.
Still, the profit outlook for technology companies — and most other companies — is dimming somewhat as growth slows, especially in Europe and the United States.
I.B.M. reported net earnings of $3.84 billion, a 7 percent increase from the year-earlier quarter. Its earnings per share from continuing operations — the number most closely watched on Wall Street — rose 15 percent, to $3.28.
The average estimate of analysts was $3.22 a share, according to FactSet.
In a conference call with analysts, Mark Loughridge, I.B.M.’s chief financial officer, singled out major sources of strength. First, he said, was the continuing rapid growth of markets abroad, including China, India, Brazil and a few dozen other emerging nations, which grew 19 percent and now account for 23 percent of I.B.M.’s revenue.
Mr. Loughridge also pointed to newer products and services like business analytics, which helps companies sift through data to spot sales opportunities and streamline operations.
“We’re on track for a great year,” Mr. Loughridge said.
Based on the third quarter and outlook, I.B.M. raised its estimate slightly for full-year profits to “at least $13.35 a share,” up from the previous guidance of “at least $13.25 a share.”
But investors were apparently looking for more. In after-hours trading, the stock fell 4 percent. In regular trading, it dropped 2 percent, or $3.94, to $186.59, in a down day for the market.
I.B.M.’s sales, analysts noted, were a little less than estimates, and the company’s earnings benefited from a lower tax rate than in the first half of the year. That contributed to the pullback in after-hours trading, they said, as did profit-taking; I.B.M.’s shares had run up 27 percent so far this year.
“It was still very solid,” said A. M. Sacconaghi, an analyst at Sanford C. Bernstein Company, “but it didn’t have the breathing room that I.B.M. quarters have typically had recently.”
Revenue for the quarter increased 8 percent, to $26.2 billion, slightly less than analysts’ estimates. Excluding gains from currency translation, revenue rose 3 percent. With the dollar strengthening recently against the euro, currency-related gains will most likely decline in the current quarter, analysts say.
I.B.M. is more stable than most technology companies regardless of the economic conditions. Analysts point to its global reach, skilled management and the fact that so much of its business comes from steady revenue from software licenses and services contracts instead of sales of new hardware products.
I.B.M. said it had seen a slowdown in government business in developed nations amid a budget squeeze. The other notable weak market, Mr. Loughridge said, was Japan, which continues to struggle to recover after the tsunami and earthquake disaster earlier this year.
In the United States, I.B.M.’s business grew by 4 percent, and it grew 7 percent in Canada.
I.B.M.’s software business worldwide grew 13 percent in the quarter, to $5.8 billion, with the biggest growth coming from its Internet-based commerce software and its data management and analysis software.
The company’s big services business grew 8 percent, to $15.2 billion. Hardware sales rose 4 percent, to $4.5 billion. Mainframe sales fell 5 percent from a year ago, though I.B.M. attributed that mainly to the comparison with the strong 2010 third quarter, when new mainframe lines were introduced.
Article source: http://feeds.nytimes.com/click.phdo?i=55da334554b91b2ee2637f1a211c8eac
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