IBM ups 2010 forecast on confidence in services, software; 2Q rev falls short and shares slip

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IBM ups 2010 forecast, but 2Q rev falls short

SAN FRANCISCO — IBM Corp. jacked up its 2010 guidance Monday on the technology company’s belief that it can wring more profit from its workhorse services and software divisions.

The numbers dovetail with other encouraging signs about the health of the technology sector, but uncertainties about the stability of world markets have weighed on the results.

IBM’s second-quarter profit topped Wall Street’s forecasts, but revenue fell short. IBM shares fell nearly 4 percent in extended trading. IBM blamed the revenue discrepancy on currency fluctuations that many analysts didn’t include in their estimates.

IBM reported after the market closed that its net income jumped 9 percent to $3.39 billion, or $2.65 per share, in the period that ended June 30, topping analyst projections for $2.58 per share. A year ago, IBM earned $3.10 billion, or $2.34 per share.

Revenue in the latest period rose 2 percent to $23.7 billion, from $23.3 billion. That was below the $24.2 billion that analysts expected. IBM said currency changes hurt revenue by $500 million in the quarter.

The company also reported a 12 percent decline in the value of services contracts signed during the quarter, to $12.3 billion.

IBM raised its 2010 net income guidance to at least $11.25 per share, an increase of a nickel per share. Yet even the boost might not be enough to please investors, as IBM consistently raises its guidance.

Investors are nursing fresh worries about the economy amid signs of sluggishness in the U.S. economy’s improvement and fears about the euro and the ability of the governments of Greece, Portugal and Spain figure to repay perilously high debts.

IBM gets most of its revenue from outside the U.S., so strength in the dollar has hurt the company, since deals done in other currencies have translated into fewer greenbacks.

The economic worries have influenced Wall Street’s reaction to the latest numbers from other technology heavyweights.

Last week Intel Corp. delivered its strongest quarter in the company’s four-decade history, helped by surging demand for microprocessors for computer servers. The shares have barely budged.

Google Inc.’s results leaped on momentum in Internet search advertising, and the company’s hiring has accelerated. Google’s stock has fallen, in part because of concerns about the weaker euro’s effect on Google and the costs connected with hiring new workers.

Shares of IBM, which is based in Armonk, N.Y., fell $4.68, or 3.6 percent, to $125.60 in extended trading. Earlier, it rose 1.4 percent, or $1.76, to close the regular trading session at $129.79.