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Tuesday, January 24, 2006

Computer Services: IBM Sees Service and Corporate PC Profit Rise

On January 18, IBM announced a 13 percent rise in quarterly profit, even though revenue simultaneously slid. The world’s largest computer corporation attributed the rise in profit directly to computer sales to businesses as well as its new and improved computer services.

Analysts with Reuters Estimates forecasted earlier that IBM stock would be valued at $1.94 per share. The company surpassed all expectations by reporting fourth quarter earnings that put stock prices at $2.13 per share. CEO Mark Loughridge assured the media that IBM had predicted it would beat analysts’ 2006 profit predictions all along.

Although annual revenue fell approximately $1 billion short of the $25.5 billion predicted for the past year, the drop certainly is not reflective of the improvements in computer services and increased business sales in the past year. The loss in revenue can be explained by the sale of IBM’s PC business as well as some unexpected unfavorable foreign exchange effects.

Computer services account for more than 50 percent of IBM’s revenue, and in part due to improved packages for businesses and individuals in 2005, showed a profit even with an unfavorable market wrought with cost cuts. Similarly, there was an increased demand among businesses of all sizes for large server computers.

Blogged by: Joshua Feinberg