IBM Did Well in Q3: 20% Increase in Net Income

IBM announced on Wednesday that its net income in the third quarter of the year went up 20 percent, while the profit forecast for the entire year seems to be quite accurate. Big Blue will present the report on its full financial results for the quarter on October 16th, and this announcement made only a week earlier is meant to calm down technology investors a little bit, who were somehow worried that the U.S. financial crisis might generate a spending slowdown.

Signs that the crisis could impact the IT market were showed on Monday, when the software vendor SAP said that, given the financial instability among its customers, a “very sudden and unexpected drop in business activity” was experienced close to the end of the third quarter. Instead of worrying, IBM said that, since its business covers a wider range, the company expects the crisis to have only a small impact on its revenues.

“Our results demonstrate that the combination of a steady base of recurring revenue and profits, investments for growth in emerging markets, a range of products and services that deliver value to clients, and a strong and flexible financial foundation give IBM a competitive edge in good times and tough times,” stated Sam Palmisano, IBM's chairman, president and CEO. “We remain confident in our full-year outlook,” he added.

Big Blue said that during Q3, its revenue climbed 5 percent over the year, up to $25.3 billion, which includes 3 percentage points coming from favorable exchange rates. The net income went up 20 percent to $2.8 billion, while earnings per share grew 22 percent to $2.05. The financial analysts expected the shares to be 3 cents lower, while the total revenue had been forecast to be much higher, reaching $26.5 billion.

Even so, IBM is confident that its earnings per share will be at least $8.75, marking a 22 percent increase over the previous fiscal year, while also being one penny lower than analysts’ prediction. A revenue forecast for the entire year hasn't been provided by the company. On Wednesday, IBM's shares dropped 5 percent at close of normal trading, going to the $90.55 mark, but experienced a 4 percent growth in trading after hours.