Array

San Francisco, July 19: IBM, the world's largest technology services company, on Wednesday posted a 12 per cent jump in quarterly profit and raised its 2007 earnings forecast as revenue surged on software-company acquisitions.

IBM shares, which earlier this week hit a five-year high, rose 3.1 per cent to $114.17 in after-hours trading following the earnings report. The shares had added 14 per cent this year as of Tuesday's close.

Citing the strong results, IBM increased its forecast for earnings-per-share growth in 2007 to 14 per cent to 15 per cent from a previous forecast of 13 per cent to 14 per cent.

Second-quarter net income advanced to $2.26 billion, or $1.55 per share, from $2.02 billion, or $1.30 per share, a year earlier. Revenue rose 9 per cent to $23.8 billion from $21.9 billion.

U.S. revenue grew 6 per cent to $10.1 billion, reversing a slowdown in the first quarter, Chief Financial Officer Mark Loughridge said on a conference call with analysts. Revenue in Europe, the Middle East and Africa rose 13 per cent and Asia-Pacific revenue was up 10 per cent.

''To get double-digit revenue increases in any part of the world is good news for them,'' said Kim Caughey, vice president and senior analyst at Fort Pitt Capital Group.

''It looks like a good report all around,'' Caughey said. ''It doesn't look like there are any holes at this point.'' Analysts, on average, had forecast earnings per share of $1.47 before certain items and revenue of $23.1 billion, according to Reuters Estimates. Second-quarter net income included a gain of $81 million, or 5 cents per share, on the sale of IBM's printer division earlier this year.

The company's gross profit margin improved to 41.8 per cent in the second quarter from 41.2 per cent a year earlier.

International Business Machines Corp., of Armonk, New York, has made more than $5 billion of acquisitions of software makers in the past year to boost sales in its most profitable business, while improving profitability in technology services, its largest business. About half of the software unit's second-quarter revenue growth came from recent acquisitions, IBM said.

Revenue in IBM's global technology services business rose 10.1 per cent to $8.76 billion. Global business services revenue grew 10 per cent to $4.34 billion. IBM signed services contracts totaling $11.7 billion, compared with $11.1 billion in the first quarter and $9.6 billion a year earlier.

IBM said on Monday it signed a $1.4 billion outsourcing agreement with drug maker AstraZeneca Plc, expanding an existing contract.

''We've got a good deal list as we go into the third quarter,'' Loughridge said on the conference call. ''Our objective is for full-year signings growth.'' In software, revenue rose 13 per cent to $4.8 billion, partly reflecting more than $5 billion of acquisitions in the business in the last year.

Systems and Technology revenue, which includes sales of mainframe computers, servers for businesses and microchips, advanced 1.8 per cent to $5.1 billion.

IBM shares trade at about 16 times expected 2007 earnings per share, compared with a multiple of 17 for rival Hewlett-Packard Co.

Reuters