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IBM shares slide nearly 4% despite solid results

IBM has reported third-quarter revenues of $24.3bn, up 3% compared with a year ago, but shares dropped 3.7% on news of fewer services deals and outsourcing contracts.

Net quarterly profit rose to $3.6bn, or $2.82 a share, compared with $3.2bn, or $2.40 a share, a year ago, ahead of analyst expectations of earnings per share of $2.75.

IBM also raised its full-year earnings outlook to "at least $11.40 per share" for the full year, up from its previous forecast of "at least $11.25".

Despite these increases, investors interpreted a decline in services and outsourcing contracts as sign of limited future revenue growth, according to US reports.

IBM's services contract signings fell 7% to $11bn and outsourcing signings fell 15% to less than $6bn.

But analysts noted the firm won a major services deal with ABN Amro shortly after the quarter closed, and said IBM was still a solid investment in the long term.

IBM attributed the acceleration of its revenue growth to a strong expansion in a broad group of emerging market countries, and a rebound in its hardware division as it launched new mainframe computers.

The company reported a 15% rise in sales of its System-Z mainframe computers, which contributed a 3% rise in overall revenue.

"We achieved excellent performance in our growth markets unit, reflecting sustained investments through the downturn and the continued strength of the infrastructure build-out in these countries," said Sam Palmisano, IBM chairman, president and chief executive.

IBM was positioned in some of the fastest-growing markets in the IT business. The company now expected to report earnings per share for 2010 of at least $11.40, up from the $11.25 it forecast three months ago, he said.


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