San Francisco: IBM Corp. released third-quarter results ahead of schedule Wednesday that beat Wall Street’s estimates, sending the company’s stock, a component of the Dow Jones industrial average, up 6 percent in after-hours trading.
The Armonk, New York-based company also reaffirmed its full-year earnings guidance, a strong sign that IBM’s core businesses are holding up well despite the deteriorating US economy.
IBM’s shares have tumbled 31% since July on concerns that IBM’s exposure to the crippled financial services industry, which accounts for 30% of the company’s sales, would hurt results.
The stock had been performing well for most of the year despite the ailing US economy, rising 25% and hitting a 52-week high of $130.93 on 24 July before the shares started sliding.
IBM rarely reveals its quarterly results early but has done it twice so far this year. The last time was in January, when IBM reported sparkling profit for the fourth quarter typically its most prosperous period that was well above what Wall Street was expecting.
In both cases, IBM’s stock price was falling and it wanted to reassure investors about the company’s financial health in tough economic times.
IBM said after the market closed on Wednesday that it earned $2.05 per share in the July-September period, four cents higher than the average estimate of analysts polled by Thomson Reuters. Net income for the period was $2.8 billion, an increase of 20% over the same period last year.
Sales increased 5% to $25.3 billion but fell short of Wall Street’s expectations. Excluding the effects of currency fluctuations, IBM’s sales increased 2%.
Analysts were expecting sales of $26.5 billion, but analysts had started lowering their estimates before Wednesday’s announcement. They cited the deteriorating economy and a strengthening US dollar as reasons for cutting their forecasts.
A strengthening dollar makes deals done in other currencies worth less when IBM accounts for the sales, which is done in dollars.
IBM maintained its forecast of at least $8.75 per share in profit in 2008, a 22% improvement over last year.
The results are reassuring in that they suggest that the biggest tech companies are still inking sales deals despite tightened spending, analysts said.