NEW YORK (CNN/Money) -
IBM jumped the gun early Thursday, posting better-than-expected quarterly earnings and revenues and saying that corporate spending on technology could grow even faster in 2004.
IBM had been expected to report earnings on Tuesday Jan. 20.
IBM (IBM: up $4.70 to $95.01, Research, Estimates) stock, one of the Dow 30 components, rose about 5 percent on its earnings, hitting an almost two-year high.
"The client buying environment is steadily improving," chief executive Sam Palmisano said in a statement.
Earnings excluding special items increased to $2.7 billion, or $1.56 a share, up from $1.34 a share in the year-earlier period. Analysts surveyed by First Call had forecasted earnings of $1.50 a share, with a range from $1.46 to $1.54.
Revenue rose to $25.9 billion from $23.7 billion a year earlier. That beat the forecast of $25 billion. The company was helped by the decline in the value of the dollar, which boosted the dollar-value of sales generated in many other currencies. While revenue was up 9 percent on an absolute basis, it would have edged up only 1 percent without the currency effect.
The company saw better than 10 percent growth in revenue in four of its six industry sectors that it sells to during the fourth quarter, led by the largest sector, financial services, which grew 17 percent year over year.
Technology spending was mired in a slump for three years. While consumer buying picked up and helped PC-makers Dell Inc. (DELL: Research, Estimates) and Apple Computer Corp. (AAPL: Research, Estimates), IBM did not benefit as much because it relies more on tech spending by businesses, which has lagged.
But in the fourth quarter, IBM signed $17.3 billion in new consulting and services contracts, surpassing its $14 billion target that some analysts had expected it to miss. Those contracts are an indicator of future revenue growth.
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The company did not give any specific earnings or revenue guidance for 2004, though chief financial officer John Joyce said that the current earnings forecast, "is reasonable." The First Call consensus EPS forecast for 2004 is $4.87 a share, versus $4.34 in 2003. Joyce said that revenue growth, now expected to be about 15 percent in 2004, could be a percentage point or so faster, depending on currency exchange rates.
"In the past few years we have not been addressing our longer-term growth objectives because the industry was in decline," said Joyce. "We felt it would be naive to talk about growth when we knew our customers weren't spending. But in 2003 we said that the industry had stabilized and I would characterize 2004 as a year when the IT industry will begin its next growth cycle."
Joyce said the report was released earlier than originally planned because executives finished compiling the company's full-year results a bit earlier than expected and did not want to hold back results over the upcoming three-day market holiday.
"[IBM] still has a few warts," John Jones, an analyst with Soundview Technology said. "But the positives more than outweigh a few of the challenges in places such as microelectronics," he said referring to the IBM's semiconductor manufacturing business, which posted a small loss.
-- Reuters contributed to the story
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