After a middling performance in recent years, the tech giant’s next phase threatens to be much less rewarding for shareholders, some analysts say.
Information technology giant International Business Machines Corp. reported an 11-per-cent increase in fourth-quarter profit, beating estimates and underscoring signs of confidence that economic worries had crimped tech spending.
The Armonk, N.Y.-based company said on Thursday that fourth-quarter that profit, excluding items, was $4.71 (U.S.) a share, above average expectations of $4.62 according to Thomson Reuters I/B/E/S.
IBM, a tech bellwether because of its global reach and scale, brought in revenue of $29.5-billion, up from $29-billion in the same period last year and just below average estimates of $29.7-billion.
IBM expects to deliver full-year 2012 GAAP earnings per share of at least $14.16 and operating (non-GAAP) earnings per share of at least $14.85.
IBM aims to increase earnings by 10 per cent this year, a target underscoring signs of confidence in global tech spending.
"We had a strong fourth-quarter performance, capping a year of record earnings per share, revenue, profit and free cash flow," Ginni Rometty, who took over as chief executive on Jan. 1, said Thursday.
"We are well on track toward our long-term road map for operating earnings per share of at least $20 in 2015."
This year, IBM plans to increase full-year earnings per share, excluding items, by 10.5 per cent to at least $14.85
It said its services backlog was $141-billion, up $5-billion adjusting for currency, while signings of services contracts in the fourth quarter were $20.4-billion against expectations of $20.1-billion.
Investors view signings as a key indicator of future profits. But IBM says the focus should be more on total backlog of business because it is a better sign of revenue to come.
Globally, IBM reported a 3-per-cent revenue gain in the Americas and 1 per cent in Europe, the Middle East and Africa in the fourth quarter. Revenue in the Asia-Pacific region fell 1 per cent adjusted for currency effects, while revenue in the BRIC – Brazil, Russia, India and China – countries was up 8 per cent.
Kim Forrest, a senior analyst for Fort Pitt Capital Group said: "They are bullish for the next quarter, so I am pretty happy as a holder of IBM." She added she was "unbelievably encouraged by their margins."
IBM share were up 2.7 per cent at $185.50 in after-hours trade after closing at $180.52 on Thursday.