JOHANNES EISELE
International Business Machines Corp. reported a decline in signings of new business at its global services division during the first quarter, even as it reported profit and revenue ahead of analysts' projections.
Signings fell 14 per cent from a year earlier to $10.5-billion (U.S.) during the first quarter, causing Wall Street analysts to grill the company on the reason for the decline during an earnings conference call.
IBM shares fell during the call Tuesday, declining 2.2 per cent in extended trading to $161.75. They hit a record $167.72 last month.
"I realize that one quarter signings doesn't make a trend, but it looks like your last four quarters trailing signings are actually down," Sanford Bernstein analyst Toni Sacconaghi told IBM's chief financial officer, Mark Loughridge, during the conference call.
Mr. Loughridge said that signings are not a good predictor of future revenue. Instead he said that investors should focus on order backlog, which was up 6 per cent at the end of the quarter at $142-billion.
The world's largest technology services firm managed to beat expectations for first-quarter profit and revenue, even though it does about 11 per cent of its business in crisis-stricken Japan.
That was partly because of strong performance in the red-hot markets of Brazil, Russia, India and China, where revenue was up a combined 26 per cent from a year earlier.
"These numbers show IBM's resiliency. They beat on just about every area I had hoped," said Ted Parrish, co-portfolio manager of the Henssler Equity Fund.
IBM raised its forecast for full-year profit, excluding items, to at least $13.15 from its previous view of at least $13.00.
IBM benefited from strong demand for the latest version of its mainframe computer, which it introduced in the third quarter of last year. Sales of that product were up 41 per cent from a year earlier.
The company also reported first-quarter profit, excluding items, of $2.41 per share, ahead of the average analyst forecast of $2.30, according to Thomson Reuters I/B/E/S.
Revenue rose 8 per cent from a year earlier to $24.6-billion, beating the average analyst forecast of $24.0-billion.
"The concern is they didn't really guide a whole lot higher than they had originally for the year, if you take into account the earnings surprise," said Fort Pitt Capital Group senior analyst Kim Caughey Forrest. "That's a little disappointing."
IBM shares were little changed, dropping to $165.36 from their New York Stock Exchange close of $165.40.