IBM soars on strong earnings, outlook
Tech bellwether offers 2009 profit outlook above Wall Street's expectations. Stronger dollar weighs on revenue.
NEW YORK (CNNMoney.com) -- Shares of IBM Corp. jumped 4% after hours Tuesday after the blue-chip reported better-than-expected fourth quarter earnings and offered an upbeat outlook for the year despite declining revenues.
The Armonk, N.Y.-based company reported net income of $4.4 billion, or $3.28 per share, for the three months ended Dec. 31. That compares with net income of $4 billion, or $2.80 per share, a year earlier.
Revenue in the quarter was $27 billion, down 6% from $28.9 billion in the prior year. IBM said revenue fell only 1% when currency changes are taken into account.
Analysts were expecting IBM to report earnings of $3.03 per share and revenue of $28.15 billion, according to a consensus of estimates compiled by Briefing.com.
For all of 2008, the company reported earnings per share of $8.93 and revenue of $103.6 billion. Analysts were expecting earnings per share of $8.69 and revenue of $104.75 billion.
"In 2008 IBM performed well in an extremely difficult economic environment," said IBM chief executive Samuel Palmisano in a statement.
Palmisano told analysts in a conference call that the company's disciplined cost controls, healthy cash reserves and focus on technology services and software helped drive the IBM's fourth-quarter performance.
Looking ahead, IBM said that it expects 2009 earnings of $9.20 per share, compared with consensus estimates of $8.75 per share.
"While I completely understand that 2009 will be a challenging economic environment, we enter the year in a very strong position," Palmisano said.
IBM expects to profit from massive economic stimulus programs that are being discussed in the United States and other countries, including potential government spending on "smart energy grids" and "health care IT," Palmisano said.
"IBM is uniquely positioned to help advance these plans around the world," he said.
Revenue from the Americas fell 2% to $11.5 billion. But after adjusting for currency fluctuations, the company said it increased 2%.
In Europe, the Middle East and Africa, sales dropped 12% to $9.5 billion. When currency changes are taken into account, sales from these regions fell 1%, IBM said.
Sales from the company's global services division fell 4% to $9.6 billion while revenue from the software segment rose 3% to $6.4 billion. IBM said it had signed services contracts totaling $17.2 billion, including 24 contracts greater than $100 million, in the quarter.
IBM, the world's largest IT company, has a large percentage of recurring revenue and has aggressively managed costs, which should help support earnings growth going forward, according to analysts at Citigroup. But even the traditionally insulated technology sector is not immune to the global recession.
"While the shares are likely to enjoy a relief rally on above consensus '09 earnings per share guidance, uncertainty regarding the IT spending outlook later this year should keep the shares range-bound between $80-90 for several quarters," said Citigroup analyst Richard Gardner in a research note.
Shares of IBM (IBM, Fortune 500) rose $3.83, or 4%, to $85.81 in extended trading after falling $2.94, or 3%, in the regular session. 
