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IBM: Reassurance from Big Blue

by: Ron Haruni October 09, 2008 | about stocks: IBM    

Ron Haruni

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International Business Machines (IBM) reported today its preliminary third-quarter ‘08 earnings results. The world’s largest computer-services co. beat analysts’ estimates, reiterated its annual forecast, and delivered a dose of reassuring news for its stock which has dropped nearly 18% in the last week.

IBM said its third-quarter ‘08 profit rose to $2.05 per share, a 22% increase from $1.68 a share on year-over-year basis, which is $0.03 higher than analysts’ consensus estimate. Big Blue also reaffirmed its previous guidance for its profits for the entire year.

Revenue posted gains as well,  increasing by 5%, including 3 points of currency benefit, to $25.3 billion, compared with the third quarter of 2008. Excluding currency gains, the revenue growth was 2%. Gross margin widened to 43.3% from 41.3% in the third quarter of 2007. Pre-tax income was $3.9 billion, an increase of 19% compared with the third quarter of 2007. On a dollar basis, net income rose 20%, to $2.8 billion.

Armonk, N.Y.-based IBM said that despite a softening economy, it still expects full-year ‘08 earnings per share of at least $8.75. At the end of the third quarter, IBM’s current free cash flow is $6.4 billion and its cash balance was $9.8 billion.

“Our results demonstrate that the combination of a steady base of recurring revenue and profits, investments for growth in emerging markets, a range of products and services that deliver value to clients, and a strong and flexible financial foundation give IBM a competitive edge in good times and tough times,” said Samuel J. Palmisano, IBM chairman, president and chief executive officer. “We remain confident in our full-year outlook.”

After it announced its earnings results at about 6 p.m., well after the close of trading on the New York Stock Exchange, IBM’s shares gained more than 5.35%, or $5.91, to $95.90.

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This article has 5 comments:

  •  
    Oct 09 12:54 AM
    Any at least someone knows what they are doing in this economy

    Cheers
    Reply
  •  
    Oct 09 02:18 AM
    long time see the first real good news.
    Reply
  •  
    Oct 09 03:26 AM
    The frigging economy is not the problem....it's just our shitty banking system with CDO's, risky mortgages and good knows what other crap they have. That's the only crappy thing out there.
    Reply
  •  
    Oct 09 03:50 AM
    Investa Mania,

    IBM is clueless. Do you really think that beyond their 1-year outlook that revenue will remain steady? Way too much exposure to emerging markets, way too optimistic an outlook. IBM should be trading below $40 if we're going to price in what's in store for them in this economy. Take a look at SAP. It's tanking. IBM is extremely overvalued. I wouldn't pay more than 5x forward for this bloated thing. Want to change my mind? Do two things for me: tell IBM to triple their dividend; and show me some earnings that don't rely so heavily on luck in the currency markets.
    Reply
  •  
    Oct 09 09:23 AM
    As an ex-ibm employee, I can assure you no one can cook the books like IBM. Rob from Peter to pay Paul all day long. IBM picks a number and then backs into it.
    Reply
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