IBM's signings of new business at its services division surged 16 percent in the second quarter, trouncing expectations and raising hopes that 2011 will be a good year for the technology sector.
Investors had feared that technology sales would slow in the second half, hurt by the economic uncertainty in Europe and Japan. But IBM offset sluggish business there with strong growth in developing markets from Brazil to China, and robust sales of a new line of mainframe computers. International Business Machines Corp shares climbed 2 percent to a record high on the news. The company also raised its full-year profit forecast after second-quarter results beat Wall Street estimates.
IBM said on Monday that signings rose to $14.3 billion during the second quarter, beating Wall Street projections and easing investor concerns after the closely watched number dropped in the first quarter.
Investors believe signings is a key indicator of future profits. But IBM says the focus should be more on total backlog of business, which grew by $15 billion during the quarter to $144 billion.
Some investors had feared that corporations will keep a tight grip on 2011 technology budgets, waiting out the economic uncertainty in the United States and Europe. But developing markets drove top line growth for IBM. On a constant-currency basis, revenue leaped 13 percent in growth markets - which includes the BRIC countries of Brazil, Russia, India and China - far outpacing the 3 percent sales growth chalked up in so-called major markets. IBM reported second-quarter profit, excluding items, of $3.09 per share, beating the average Wall Street forecast of $3.03, according to Thomson Reuters I/B/E/S.
Revenue rose 12 percent from a year earlier to $26.67 billion, ahead of the average forecast of $25.35 billion. Shares in the Armonk, New York, company rose to $178.90 in extended trade, beating the previous record high of $177.76 on July 6. They had fallen 26 cents to $175.28 in regular New York Stock Exchange trade on Monday.