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Follow UsBy Philipp Gollner
SAN FRANCISCO: International Business Machines Corp., the world's largest technology services company, reported higher first-quarter earnings on Tuesday as sales of software and computer services increased.
Net income rose to $1.84 billion, or $1.21 per share, from $1.71 billion, or $1.08 per share, a year earlier. Revenue climbed to $22.03 billion from $20.66 billion, IBM said.
Analysts, on average, expected earnings of $1.21 per share on revenue of $21.9 billion, according to Reuters Estimates.
Last year, IBM paid nearly $5 billion for 13 acquisitions to boost sales of software and services.
Shares of IBM rose 1.5 percent to $98.60 in after-hours trading following the earnings report.
"The worry going into the quarter was sluggishness (in) server spending, but the fact that IBM pulled off the quarter shows that the diversified portfolio of businesses is working," said Sunil Reddy, senior portfolio manager at Fifth Third Asset Management, which oversees about $21 billion, including IBM shares.
IBM said revenue in its services business, which accounted for more than one-half of total sales in 2006, rose 8 percent in the quarter. Services signings, a key indicator of future revenue, slipped to $11.1 billion from $11.4 billion.
Revenue in its Global Business Services unit, which includes consulting and managing of customers' business software, increased 8.7 percent to $4.2 billion. It was the eighth consecutive quarter of year-over-year pretax profit growth in the business, reflecting IBM's push to sell more-profitable software-based services.
IBM's first-quarter deals included a $775 million contract to manage information-technology for Circuit City Stores Inc.'s more than 600 stores.
IBM also signed a $700 million extension of a contract with Germany's Sparkassen Informatik GmbH, which handles information technology for savings banks.
Software revenue rose 8.8 percent to $4.25 billion in the first quarter, helped by strong sales of IBM's middle-ware software for running corporate data networks.
Sales of hardware, including microprocessors and servers and storage gear for businesses, rose 2.3 percent to $4.52 billion.
The stock closed up 1 percent at $97.12 in regular-session trading on the New York Stock Exchange.
Shares of Armonk, New York-based IBM are down 2.3 percent this year amid investor concern over revenue and profit growth for 2007. The stock trades at about 14 times estimated 2007 earnings per share, compared with an average multiple of about 15 for companies on the Standard & Poor's 500 Index, including competitor Hewlett-Packard Co.