NEW YORK -- First-quarter profits rose 16 percent at IBM Corp. and matched Wall Street estimates Thursday, though rebounding corporate spending and weakness in the dollar helped the technology bellwether exceed revenue forecasts.
IBM earned $1.6 billion, or 93 cents per share, on revenue of $22.3 billion in the first three months of the year. In the comparable period last year, IBM made $1.38 billion, or 79 cents a share, on $20.1 billion in revenue.
Analysts surveyed by Thomson First Call were expecting IBM to show earnings of 93 cents per share and revenue of $21.9 billion, but some talk of an "upside surprise" had bubbled up on Wall Street in recent days.
In earlier reports to investors, IBM executives had expressed optimism that corporate technology spending would start a new growth cycle this year.
"This quarter's results reaffirmed this view," John Joyce, IBM's chief financial officer, said in a conference call with analysts. "Overall we are pleased with IBM's position."
He called analysts' current forecasts "reasonable." Before Thursday's report, analysts were projecting IBM would earn $1.12 per share on revenue of $23.2 billion in the current second quarter. Full-year forecasts call for a profit of $4.93 per share, with revenue of $95.7 billion.
"We remain enthusiastic about our prospects for 2004," chairman and CEO Sam Palmisano said in a prepared statement.
IBM shares rose 27 cents to close at $93.97 on the New York Stock Exchange before the earnings report. The stock fell $1.97, or 2 percent, in extended trading.
IBM's 11 percent increase in quarterly revenue included a 15 percent gain in sales to small and medium-sized businesses, which has been a closer focus of late.
But the revenue rise would have amounted to 3 percent without currency fluctuations. Weakness in the U.S. currency inflates the dollar value of international sales.
IBM's services division, which accounts for half of the company's sales, showed a 9 percent gain in revenue, though the increase would have been only 1 percent without currency fluctuations. IBM said the unit booked $10 billion in new contracts in the quarter.
IBM tinkered with its internal alignment in the quarter, bringing the money-losing technology group, which makes high-end chips, into the company's successful systems group, which sells mainframes and servers. IBM also announced that it would share chip designs and collaborate more with outside developers in hopes of getting its semiconductors into wider use.
Combined, the systems and technology group showed an operating profit of $170 million in the first quarter. On its own, the technology group lost $252 million in all of 2003.
The company's services thrust has been taking the company in new directions. This week IBM announced a $300 million deal to take over product service for Philips' consumer electronics division, putting Big Blue in charge of handling warranties and overseeing repairs for TVs and CD players.
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