Friday, April 9, 2010

IBM Corp. (NYSE: IBM): Q1 Earnings Preview 2010

IBM, the world's largest computer-services provider, is scheduled to release Q12010 earnings after the closing bell on Monday, April 19, 2010. Analysts, on average, expect the company to report earnings of $1.93 per share in the first quarter with estimates ranging from a low of $1.83 to a high of $2 per share. Revenues for the quarter are estimated to be $22.80 billion. In Q12009, the company reported earnings of $1.70 per share on revenue of $21.71 billion.

International Business Machines Corporation, often considered a technology bellwether, develops and manufactures information technology products and services worldwide. Its Global Technology Services segment offers IT infrastructure and business process services, such as strategic outsourcing, integrated technology, business transformation outsourcing, and maintenance. In the last 15 quarters, IBM has topped Wall Street estimates 14 times and met estimates once. The company dominates mainframe and server market.

In the preceding Q42009, the Armonk, New York-based company reported that its net income rose 9% to $4.81 billion or $3.59 per share, compared to $4.43 billion or $3.27 per share, in the year-ago quarter. Revenue grew 1% to $27.23 billion from $27.01 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of $3.47 per share on revenue of $26.96 billion. The company's total gross margin for the quarter improved to 48.3% from 47.9% a year ago, helped by higher margins in its services segments and Systems and Technology. IBM signed services contracts worth $18.8 billion during the quarter, an increase of 9% from last year, including 22 contracts greater than $100 million. The company ended the fourth quarter with an estimated services backlog of $137 billion at actual rates, compared to $134 billion at September 30, and $134 billion a year ago.

IBM expects full year 2010 earnings of at least $11.00 per share. In October, the company had said it remained well ahead of pace for its 2010 roadmap of $10 to $11 per share. IBM Chief Financial Officer Mark Loughridge said in January that for IBM's current, fiscal first quarter, "we expect a 4 to 5 point improvement in IBM's year-to-year revenue growth rate from the fourth quarter." By that measure, IBM's forecast would put revenue between $22.8 billion and $23 billion, while analysts had given a consensus estimate for sales of $22.3 billion.

The company is poised to benefit from uptick in corporate IT spending and improving economy. According to a Morgan Stanley survey, spending on technology is set to grow about 3.2% in 2010.

Acquisitions are a key part of IBM's growth strategy. In January, IBM agreed to buy privately-held National Interest Security Co., LLC to further strengthen its ability to deliver advanced analytics and IT solutions to the public sector. In February, IBM signed a definitive agreement to acquire Initiate Systems. It also acquired Intelliden Inc., a provider of intelligent network automation software that enables organizations such as telecommunications companies to configure, manage and scale their networks.

In terms of stock performance, IBM shares have lost nearly 1.3 percent since the beginning of the year.

Full Disclosure: None.

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