IBM’s 1Q earnings indicate tech spending picking up; results top expectations

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IBM’s earnings indicate tech spending picking up

NEW YORK — IBM Corp. said Monday its first-quarter profit jumped 13 percent, and the technology company offered evidence that the recovery in corporate technology spending is picking up speed.

IBM said it earned $2.6 billion, or $1.97 per share, in the first three months of the year. In the same period of 2009 it earned $2.3 billion, or $1.70 per share.

The improvement came not just from cost cutting, which IBM relied on much of last year to raise profits. In the most recent quarter, revenue climbed 5 percent to $22.9 billion, a bigger jump than what the company had in the last three months of 2009, when revenue grew just under 1 percent from the year before.

The first-quarter results beat average analyst estimates from Thomson Reuters of $1.93 per share on revenue of $22.8 billion.

IBM said the first-quarter revenue would have been flat at constant currency rates. Deals in other currencies translate into more dollars when the U.S. currency is weak. However IBM said it expects revenue growth in the current quarter even without accounting for currency fluctuations. IBM increased its 2010 earnings per share forecast to $11.20. Analysts were expecting $11.12.

“Looking ahead, we are confident in our ability to grow revenue,” IBM CEO Samuel Palmisano said in a statement.

The upbeat news could reflect the fact that more businesses are spending again on technology such as computer servers and software after clamping down during the recession. Intel Corp., the world’s biggest chip maker, said last week that its first-quarter income nearly quadrupled.

IBM’s earnings report came out after IBM shares rose $1.60, 1.2 percent, to close at $132.23. In after-hours trading the stock fell 2 percent.

IBM’s most profitable division, software, increased its revenue 11 percent from a year ago to $5 billion. The hardware group, which makes servers and high-end mainframe computers that big organizations use to manage information, rose its revenue 5 percent to $3.4 billion.

Investors might have been unhappy about the numbers in IBM’s biggest division, which provides technology services and consulting and accounts for more than half of the company’s revenue. Services revenue rose 4 percent to $13.7 billion but would have fallen 2 percent from last year if not for currency fluctuations.

IBM’s signings of new services deals also fell 2 percent during the first quarter, or 7 percent if not for currency adjustments. IBM signed contracts worth $12.3 billion, which is revenue that will mainly be booked in the coming years.