IBM blows past forecasts, services contracts rise

New York: International Business Machines Corp's (IBM) quarterly profit blew past Wall Street estimates, and a long-hoped-for recovery in its services business raised optimism that global companies were confident enough to spend more on technology.

The company reported that fourth-quarter net income rose 9 per cent to $5.3 billion (Dh19.45 billion).

Revenue in the fourth quarter rose to $29.0 billion from $27.2 billion, higher than the market's forecast for $28.3 billion.

Growth was spread through the business, with systems and technology revenue up 21 per cent and software revenue excluding divested operations up 11 per cent, IBM said.

Shares rose 2.7 per cent after-hours. The earnings per share of $4.18 easily exceeded its $3.59 of the year-earlier quarter and Wall Street's average forecast of $4.08.

Investors were particularly relieved with the pick-up in signings of services contracts, an early indicator of future revenue from outsourcing and other IT projects.

Many clients had been wary of committing to multiyear contracts amid an uncertain global economy.

"One of the key issues for IBM was the services area, and I think that was a big concern for investors," said Channing Smith, portfolio manager at Capital Advisors.

IBM, which has been shifting its focus from commoditised hardware to higher-margin services and software over the past decade, said it signed services contracts worth $22.1 billion during the quarter, up 18 per cent.