IBM Beats Q2 Estimates, Raises Guidance

IBM on Thursday easily surpassed Wall Street predictions for its second quarter profits, posting a 12% net income gain to $3.1 billion and an 18% increase in earnings per share to $2.32. Financial analysts surveyed by Reuters were, on average, expecting IBM to post per-share earnings of only $2.01.

IBM also raised EPS guidance for the full year 2009. The company said it now expects to earn at least $9.70 per share this year, compared to its previous forecast of $9.20.

Shares of IBM were up more than 5% in early after hours trading Thursday on the news.

IBM CEO Sam Palmisano said the company's focus on delivering a balanced portfolio of software and IT services to the global market, while lessening dependence on low margin hardware products, is helping the company weather the recession.

"As a result of our strategic transformation, we have a very strong business model that is delivering superior earnings, cash, and client value," said Palmisano, in a statement.

Even Big Blue is not entirely immune to the effects of the economic downturn, however, as the company saw revenue decline in virtually all product areas.

Overall second quarter sales were off 13%, year over year, to $23.3 billion. The company's Global Services outsourcing and consulting unit saw revenue fall 12% to $13.4 billion. Software revenues dropped 7% to $5.2 billion, while hardware sales plunged 26% to $3.9 billion.

Geographically, IBM's sales took the hardest hit in Europe and the Middle East, where revenue during the quarter fell 20% to $7.9 billion. Americas revenue was off 9% to $9.9 billion. International sales held up best in the Asia-Pacific region, where IBM is investing significantly in capital and manpower. Asia-Pacific revenues were down 7% to $4.9 billion.

Despite the sales slump, Palmisano said IBM is "well ahead of pace" to meet its stated goal of delivering earnings of $10 to $11 per share in 2010.