IBM has reported much better than expected profits for the final quarter of 2010. A long-awaited recovery in its services business also raised optimism that global companies were confident enough to spend more on technology.
IBM's net profit in the fourth quarter rose 9% from a year earlier to $5.3 billion. Its earnings per share of $4.18 easily exceeded its $3.59 of the year-earlier quarter and Wall Street's average forecast of $4.08.
Investors were particularly relieved with the pick-up in services contracts, an early indicator of future revenue from outsourcing and other IT projects.
IBM, which has been shifting its focus from hardware to higher-margin services and software over the past decade, said it signed services contracts worth $22.1 billion during the quarter, up 18%.
Analysts also noted $142 billion worth of backlog in the services business, up $5 billion from a year earlier - and a sign of strong revenue growth ahead. IBM forecast 2011 earnings per share of 'at least' $12.56, up from $11.52 in 2010.
The company's quarterly revenue rose to $29 billion from $27.2 billion, higher than the market's forecast for $28.3 billion.
Sales rose throughout the business, with systems and technology revenue up 21% and its software revenue excluding its sold-off operations up 11%. Revenue from its 'System z' mainframe business soared 69%, helped by a new line of products.
