I.B.M., which turned 100 last month, delivered better-than-expected quarterly results Monday that showed the old company had a lot of life in it.
The company got a lift from robust sales of new models of mainframes — I.B.M.’s heritage — while its biggest current businesses, software and services, generated healthy growth as well.
The company reported an 8 percent increase in net income, to $3.7 billion. Its operating profits per share rose 18 percent, to $3.09 a share, reflecting fewer shares outstanding because of I.B.M. stock buyback programs. Bolstered by the strong performance, I.B.M. raised its guidance for earnings for the full year, to “at least $13.25 a share” from the previous level of “at least $13.15 a share.”
Samuel J. Palmisano, I.B.M.’s chief executive, said in a statement that the results were evidence that the company’s long-term investments to generate growth were paying off. Those growth initiatives include large investments to build up business in fast-developing markets outside the United States and Western Europe, and acquiring companies that specialize in analyzing vast amounts of corporate and online data for insights that can increase sales and trim costs.
The financial results, on a per-share basis, compared with analysts’ consensus estimate of $3.03 a share, as compiled by Thomson Reuters. In the year-earlier quarter, I.B.M. reported earnings of $2.61 a share.
Revenue grew 12 percent to $26.7 billion, up from $23.7 billion in the comparable quarter last year. The sales gain was helped by currency gains, as a weaker dollar translated to higher revenue from business overseas. Excluding the currency gains, revenue rose 5 percent. The average revenue estimate of Wall Street analysts was $25.3 billion.
I.B.M.’s stock price rose $3.20 a share at one point, or nearly 2 percent, in after-hours trading. During regular trading hours, the company’s shares slipped 26 cents a share, to close at $175.28 a share. In the last year, I.B.M. shares have gained more than 35 percent in value.
In his statement, Mr. Palmisano noted the company’s 100-year milestone. “As I.B.M. begins its second century,” he said, “we continue a process of transformation, positioning the company to lead in the future.”
In recent years, I.B.M. has pursued a business model intended to achieve revenue growth of roughly 4 to 6 percent, while reaching earnings growth per share in the low double digits. Share buybacks and constant efficiency improvements, the company says, make the higher earnings possible.
“It’s a very good quarter for I.B.M., with strong revenue growth by its standard and impressive profits,” said A. M. Sacconaghi, an analyst for Sanford C. Bernstein Company. “The company continues to deliver on its model.”
I.B.M. is the largest supplier to businesses of information technology — computer hardware, software and services. So its performance tends to reflect broader trends in corporate spending, and I.B.M.’s performance in the second quarter is a reassuring sign of business investment.
In the wider economy, consumer spending is soft and hiring weak, but private corporate investment has been robust — and spending on information technology represents more than half of all business capital investment. IDC, a research firm, estimated last month that business and government investment in information technology in the United States would grow at 5.6 percent this year, well ahead of the growth of the overall economy.
Gartner, a research firm, recently raised its forecast for the growth in global information technology spending in 2011 to 7.1 percent, up from 5.6 percent, a projection made a few months earlier.
Analysts say companies are investing in technology to automate business operations, like ordering supplies and tracking customers. Such investments, they say, typically have a quick payoff and are less risky in uncertain economic times than hiring new workers.
Company financial reports for the second quarter are just getting under way, but the quarter should be a strong one for the technology industry, based on analysts’ estimates. The 74 technology companies among the Standard Poor’s 500-stock index are expected to report profit growth of 12 percent, notes John Butters, an analyst for FactSet Research.
That is the third-highest growth rate among the 10 industry sectors in the index, trailing only the more cyclical industries like basic materials, which includes commodities like aluminum, steel and chemicals, and energy, which is dominated by the big oil companies.
For all of 2011, technology companies in the S. P. 500 are forecast to deliver total profits of $182 billion, more than any other sector, Mr. Butters said.
I.B.M.’s big services business grew 10 percent to $15.1 billion, though that was only 2 percent after excluding currency gains. Still, new signings at $14.3 billion were higher than most analysts’ estimates. New contracts, which can stretch over years, are a gauge of future business. In the previous few quarters, the pace of new contracts signed had been sluggish, raising some concerns among analysts.
Today, mainframes are a small part of I.B.M.’s business, but in new-product cycles they can add a jolt to profits.
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