IBM raised its full-year outlook and reported higher-than-expected quarterly profit yesterday as its growing focus on higher-margin software and services businesses helped it cope with weak technology spending.
IBM still failed to satisfy investors, whose expectations had built up along with a 24-per-cent rise in the shares. A seven-per-cent drop in service contract numbers, an indication of future business, also worried Wall St.
“I think people had expected a bigger upside,” said Kim Caughey, an analyst with Fort Pitt Capital. “If you are someone who follows technology closely, the third quarter isn’t a strong quarter – so that they beat (the street) at all, I’m happy.”
Indeed, IBM reported third-quarter net profit rose to $3.2 billion, or $2.40 a share, from $2.8 billion, or $2.04 a share, a year earlier. Analysts on average expected a profit of $2.38 per share, according to Thomson Reuters.
Revenue fell seven per cent from a year earlier to $23.6 billion, although it rose one per cent from the previous quarter and was better than Wall St.’s forecast of $23.4 billion.
IBM forecast a return to revenue growth in the fourth quarter.
IBM has managed to escape the worst of the tech downturn of the past year by shifting more of its sales from servers to software and services in outsourcing, automation and technology support – areas that have remained relatively strong as companies seek ways to cut costs.
IBM shares, which had risen on hopes of a recovery in technology spending, fell 3.6 per cent to $123.30 after closing at $127.98 on the New York Stock Exchange.
Google Inc.’s growth machine is back in gear.
The world’s No. 1 search engine not only posted higher-than-expected third-quarter profits and revenues, but also said it was looking for major acquisitions and could buy a large company “maybe every year or two.”
“While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future,” Google CEO Eric Schmidt said.
“We’re open for business in making strategic acquisitions, both large and small,” he told analysts on a conference call.
Shares of Google, which have surged over 80 per cent since mid-March and set a fresh 52-week high this week, rose 3.2 per cent to $547 in extended trading.
Net revenue in the third quarter – excluding traffic acquisition costs, or the money that Google shares with partners – rose 8.5 per cent from a year earlier to $4.38 billion, beating the $4.24 billion expected by analysts.
Advanced Micro Devices Inc. reported a quarterly net loss that beat Wall St. expectations on the back of strong notebook processor shipments.
But its shares fell five per cent as investors cashed in gains that resulted, in part, from the blockbuster earnings reported by rival Intel earlier in the week. Even with the drop, AMD’s shares were up 11 per cent from the start of last week.
AMD posted a net loss of $128 million, or 18 cents per share, for the third quarter, ended Sept. 26, compared with a net loss of $134 million, or 22 cents per share, a year earlier.
Source: http://www.montrealgazette.com/news/todays-paper/raises+outlook/2108406/story.html
