IBM's 2009 profit outlook rosier than expectedIn what promises to be a dismal year for technology spending, IBM Corp. Overall sales fell six per cent.IBM's net income for the period was $4.4 billion US, or $3.28 US per share. That amounted to a 12 per cent profit increase from $3.95 billion US, or $2.80 US per share, in the same period a year earlier.Analysts were expecting IBM to earn $3.03 US per share this time.IBM shares jumped 4 per cent in extended trading on Tuesday."To be honest, I didn't believe they could show something like this," said Peter Misek, an analyst with Canaccord Adams, speaking of IBM's profit increase. "I think the results they posted were stellar gw2 gold. They just executed really well - really, really, really well."Analysts had been expecting IBM to be hurt worse by its heavy dose of sales to big banks and other customers devastated by the economic downturn. Instead, IBM's results show that while the company has seen some sales vaporize, it is still able to wring out better profits because of aggressive cost-cutting and by focusing only on the most profitable deals.One key measure of profitability - IBM's gross profit margin - expanded to 47.9 per cent of revenue, three percentage points better than the year-ago period. IBM credits its services business with leading the gain.Business revenue falls The higher profits came even as IBM's revenue fell 6 per cent to $27 billion US, short of the $28.1 billion US analysts were expecting. IBM said revenue would have decreased only 1 per cent were it not for currency fluctuations, but sales were down in all major geographic areas.Revenue in services gw2 gold, IBM's largest business segment, dropped 4 per cent, but IBM was able to ink $17.2 billion US in new services contracts. That was a healthy showing that demonstrates companies are still forking out for outsourcing and other technical support contracts, which are often viewed as money-savers in the long run.Hardware revenue fell 18 per cent. Mainframe revenue fell 6 per cent, and sales of lower-end servers based on industry-standard processors fell 32 per cent.Weakness in hardware sales was expected, since companies don't buy as much new machinery when times get tough. But even struggling businesses generally keep ponying up for the services contracts they have locked into since many of those arrangements are for vital parts of the business, like managing their billing or maintaining the databases.Rick Hanna, an equity analyst with Morningstar Inc., said he is concerned about the slowdown in some of IBM's hardware sales since having IBM machines inside a business helps sell software and other services. Still, Hanna said he was "very, very impressed" with IBM's ability to improve profit margins despite the grisly economic landscape."When I was reading through it guild wars 2 gold, my first comment was 'Wow,'" he said. "It really speaks to them developing their high-value-added strategy and executing it."You've got to recognize that this isn't your father's IBM. It's not the one that's so hardware-dependent. Software and services tend to be more resilient, and they're proving that."No job cuts - for now IBM did not announce widespread job cuts, which some analysts believed were imminent, but repeated that it is still doing targeted layoffs as part of ongoing cost-cutting. IBM lays off thousands of workers each year, but overall head count keeps rising as the company adds jobs in faster-growing regions or more profitable divisions.IBM employed more than 400,000 people at the end of 2008, the first time in more than 20 years the company's work force has been that big. The last time IBM employed a work force that size, a severe downturn caused the company to jettison many of those workers in waves of brutal downsizing.IBM shed more than 150,000 workers in the 1990s as the company racked up nearly $16 billion US in losses over a five-year stretch.For all of 2008, IBM earned $12.3 billion US, or $8.93 US per share. That represents an 18 per cent jump from a year ago. Sales were $103.6 billion US, a 5 per cent increase.The earnings report came out after IBM shares closed at $81.98 US, down $2.94 US, or 3.5 per cent. The stock jumped to $85.30 US in after-hours trading.
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