IBM Beats Expectations, Initial Reaction Led By Sellers

IBM (IBM) posted earnings of $2.26 EPS on revenues of $26.3 Billion, above both estimates of $2.19 EPS and $25.65 Billion revenues.

Revenues from the Software segment were $5.6 billion, an increase of 14 percent from 2005;  For the Global Services business, segment revenues from Global Technology Services increased 7 percent (4 percent, adjusting for currency) to $8.6 billion, and segment revenues from Global Business Services increased 6 percent (3 percent, adjusting for currency) to $4.2 billion.

IBM signed services contracts totaling $17.8 billion, up 55 percent year over year, and ended the full year with an estimated services backlog of $116 billion, an increase of $5 billion from the prior-year period and roughly up $7 Billion sequentially.

As of last quarter, IBM’s diluted EPS were $1.45 and total revenues were $22.6 Billion.  last quarter IBM signed services contracts totaling $10.5 billion and ended the quarter with an estimated services backlog, including Strategic Outsourcing, Business Transformation Outsourcing, Global Business Services, Integrated Technology Services and Maintenance, of $109 billion.

In the services sector IBM competes against EDS (EDS), Accenture (ACN), Infosys (INFY), Wipro (WIT).  Cramer recently named his favorite IT services names, so you can go back here to see what he said on these names Tuesday.

IBM is often thought of as more of a services and software name now, so it didn’t fare as poorly as many other chip and tech companies.  IBM closed down 0.55% at $99.45 on the normal day, and the 52-week trading range is $72.73 to $100.90.  Wall Street must be wanting too much and they must be wanting to sell everything, because the initial reaction to the report shows shares down 2.5% to $97.00 in after-hours activity.  It looks like the reaction may be to the service revenues.

Jon C. Ogg
January 18, 2007