At a time when consumers are worried about the nation's economy, IBM wants everyone to know it is financially sound. The Armonk, NY-based company released a preview of its earnings Wednesday, a week before its scheduled earnings announcement on Oct. 16, and said it remains confident in its financial outlook for the year.
Analysts say the move was a silver lining in a dark cloud and helped reassure shaken technology investors who have been selling stocks because of fears of a decrease in spending.
"With these market conditions, we felt it was important to get our results out as soon as possible," Mike Fay, a spokesperson for IBM, told us.
The computer and software maker reported an increase of 22 percent in its third-quarter earnings of $2.05 per share, up from $1.68 in the same quarter of 2007. The unexpected announcement pushed up IBM's stock price.
IBM's earnings beat forecasts on Wall Street, which had predicted a four-cent difference. But sales were not on target with analysts' estimates of $26.5 billion. Some analysts in recent days pulled back their initial estimates for IBM's earnings for the quarter and year given the economy and how it might impact the company's sales.
IBM's income for the quarter was $2.8 billion, an increase of 20 percent, according to the company. At the end of the third quarter, IBM's year-to-date free cash flow was approximately $6.4 billion and its cash balance was $9.8 billion.
"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," said Samuel J. Palmisano, IBM chairman, president and chief executive officer. "We remain confident in our full-year outlook."
IBM executives said the company expects full-year earnings per share to be a minimum of $8.75 with a year-to-year growth of 22 percent.
In the Clouds
The earnings preview comes after IBM made a strategic move to help its customers during a tough economic period by rolling out an initiative in cloud computing.
The move was based on challenges faced by its customers, according to IBM, who need to grow in a global economy while dealing with a perfect storm of data deluge, a regulatory environment, and a widening gap in IT skills. These challenges, according to IBM, are placing additional financial pressures on clients already strapped for resources.
IBM plans to join the effort in cloud computing by offering its own cloud services portfolio; helping others design, build, deliver and market cloud services; and help customers integrate cloud services into their businesses.