IBM Fourth-Quarter Profit Beats Analysts’ Estimates on Software
January 20, 2012, 5:23 PM ESTBy Beth Jinks
Jan. 19 (Bloomberg) -- International Business Machines Corp., the world’s biggest computer-services provider, reported fourth-quarter earnings and gave a 2012 forecast that exceeded analysts’ estimates as companies spend more on its software.
Earnings, excluding some items, increased to $4.71 a share from $4.25 a year earlier, Armonk, New York-based IBM said today in a statement. Analysts projected $4.62, the average of estimates compiled by Bloomberg. IBM forecast 2012 earnings of at least $14.85 a share, higher than the $14.81 analysts predicted.
Virginia “Ginni” Rometty succeeded Sam Palmisano this month, becoming the first female chief executive officer in the company’s 100-year history. She inherits a five-year plan that includes growing software to half of IBM’s earnings, with a focus on programs that help businesses analyze and project trends, as well as on cloud computing and emerging markets.
“Software brings higher margins and also the rich maintenance revenue stream,” Mark Moskowitz, an analyst at JPMorgan & Chase Co., said in a note before the results. “IBM’s software revenue growth outpaced the broader market.”
Sales increased 1.6 percent to $29.5 billion, compared with the $29.7 billion analysts had predicted. The euro declined 3.2 percent against the dollar last year amid Europe’s debt crisis. The drop means revenue from Europe, which combined with Middle East and Africa accounts for almost a third of IBM’s sales, is worth less when converted to dollars.
Net income rose 4.4 percent to $5.49 billion, or $4.62 a share, from $5.26 billion, or $4.18 a share, a year earlier. IBM has said it targets annual operating earnings of $20 a share by 2015.
Rometty’s Moves
IBM fell 0.3 percent to $180.52 at the close in New York. The shares reached a record in 2011 and rose 25 percent for the year. They have lost 1.8 percent this year.
Rometty, 54, formerly IBM’s head of sales and marketing, took the helm Jan. 1 after the succession was announced in October. Palmisano, who had been CEO since 2002, remains chairman.
In her first promotions this month, Rometty named Bruno Di Leo as sales and distribution chief and Bridget Van Kralingen as head of consulting, replacing a retiring Frank Kern. She also appointed James Bramante senior vice president of the growth markets unit, an elevated title as IBM seeks to boost the unit to 30 percent of sales by 2015.
The company has set goals of adding $20 billion in new revenue, including spending about $20 billion on acquisitions, from 2010 through 2015, as it expands offerings to business customers.
--With assistance from Alexander Yablon in New York and Anchalee Worrachate in London. Editors: Ville Heiskanen, Cecile Daurat
To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net
To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net
