IBM raises forecast after 7pc lift in profit

IBM, the world's biggest computer-services provider, raised its full-year earnings forecast after posting a 7.1 per cent increase in first-quarter profit, helped by software margins.

Operating earnings will increase to at least US$15 ($18.25) a share this year, IBM said yesterday, boosting its January forecast of at least US$14.85.

Analysts predicted US$14.92, the average of estimates compiled by Bloomberg.

The company also reported revenue for last quarter that fell short of projections.

IBM is making progress with a plan to make software, which is more profitable than hardware, account for half of earnings as businesses and Governments boost spending on programmes that analyse data and project trends.

Consulting was hurt by Japan's recovery from last year's earthquake and tsunami, as well as constrained government budgets all over the world, chief financial officer Mark Loughridge said yesterday.

"The major markets continued to be weighed down by Japan and by the public sector, which declined more sharply this quarter" in terms of business services demand, Loughridge said on a conference call.

"The growth markets continued to perform well, with double-digit growth again this quarter."

Loughridge reiterated that he expects the company's performance to improve in the second half.

"The top line and likely the bottom line should be stronger in the second half," said Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co.

"The comparisons get a lot easier and they are going to have some benefits from the cost cutting," said Sacconaghi, who has a market perform rating on the stock.

Sales increased 0.3 per cent to US$24.7 billion, compared with the US$24.8 billion analysts predicted.

Net income advanced to US$3.07 billion, or US$2.61 a share, from US$2.86 billion, or US$2.31, a year earlier.

Earnings excluding some items rose to US$2.78 a share from US$2.41.

Analysts predicted US$2.65.

Revenue from Europe, Middle East and Africa declined 2 per cent to US$7.6 billion, while sales in the Americas and Asia-Pacific region increased.

The effect on IBM's revenue growth from Europe's debt crisis might worry some investors, said Joseph Foresi, an analyst at Janney Montgomery Scott in Boston, who has a buy rating on the company.

- Bloomberg

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