IBM shrugs off U.S. slowdown with strong quarter

Company raises its earnings estimates for the second straight quarter as it reaps the benefits from international diversification.

Make of this what you will, but another technology bellwether racked up a pretty good second quarter. On Wednesday, Intel surprised with stronger-than-expected earnings. Thursday, it was IBM that blew away estimates, as the company increased its profit forecast for the second straight quarter.

IBM CEO Sam Palmisano IBM

(Meanwhile, Google and Microsoft , which also reported after the close of trading on Thursday, each missed earnings estimates. Check back with CNET News for ongoing coverage on their respective conference calls.)

It was a better story for IBM, which posted $1.98 in earnings per share, up from $1.55 a year ago in the same period, as revenue climbed 13 percent to $26.8 billion. (The company's 2007 results included a 5-cents-per-share gain from the sale of its printing systems division.)

Big Blue also improved its gross profit margins, which inched up to 25.8 percent in the quarter, from 24.3 percent during the year-earlier period.

Perhaps more than most companies, IBM's global footprint insulated itself from the slowdown in the U.S. economy. Here's the geographic breakdown:

•  The Americas were up 8 percent, to $10.9 billion.

•  Europe/Middle East/Africa climbed 20 percent, to $9.8 billion.

•  Asia-Pacific revenue increased 16 percent, to $5.3 billion.

In a prepared statement, CEO Sam Palmisano said IBM is sticking with its 2010 projection of $10 to $11 of earnings per share.

Palmisano called the quarter "outstanding," demonstrating that IBM's diversified product portfolio can sell in both established and emerging markets.

Annex Research financial analyst and IBM follower Bob Djurdjevic said IBM's quarter allays concerns that the IT sector will follow the poor stock performance of financial stocks.

"Big Blue is firing on all cylinders. Wall Street doomsayers and recession buzzards had better look for trouble outside the IT industry," he wrote in a note.

CNET News' Martin LaMonica contributed to this report.

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About the author

Charles Cooper was an executive editor at CNET News. He has covered technology and business for more than 25 years, working at CBSNews.com, the Associated Press, Computer & Software News, Computer Shopper, PC Week, and ZDNet.

 

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