Software growth helps IBM boost fourth-quarter earnings

IBM's stock price increased more than 4 percent in after-hours trading following the announcement, as the results seemed to ease investor worries about the uncertain global economy dampening corporate and government spending on technology. The results beat Wall Street's expectations, as is often the case with IBM. The technology bellwether's guidance for 2013 was also stronger than expected.

It has helped that the company has been focusing on growing its software business, which has higher profit margins, over hardware. In fact, software was the only business segment that saw a revenue increase during the quarter.

IBM is seen as a good gauge of technology demand because it sells to major companies and governments around the world. That said, it's not completely immune from economic fluctuations. Its revenue missed Wall Street's expectations in the third quarter, something IBM attributed largely to the economic turmoil in Europe and elsewhere.

IBM said Tuesday that it earned US$5.83 billion, or US$5.13 per share, in the October-December period. That's up 6 percent from US$5.49 billion, or US$4.62 per share, in the same period a year earlier.

The results include special items related to acquisitions and to IBM's pension plan. Excluding those items, earnings were US$5.39 per share in the latest quarter, above Wall Street's estimates of US$5.25 per share.

Revenue slid less than 1 percent to US$29.3 billion from US$29.49 billion. It would have been flat were it not for currency fluctuations, which translated to fewer dollars IBM made on overseas sales. Analysts polled by FactSet had expected revenue of US$29.12 billion.

Revenue from software was US$7.9 billion, an increase of 3 percent from the fourth quarter of 2011. Revenue from hardware fell 1 percent to US$5.8 billion and revenue from technology services fell 2 percent to US$10.3 billion. Revenue from other businesses declined as well.

For the full year, IBM earned US$16.6 billion, or US$14.37 per share, up 5 percent from US$15.86 billion, or US$13.06 per share, in 2011. Adjusted earnings were US$15.25 per share last year, above analysts' estimates of US$15.14.

Revenue declined 2 percent to US$104.5 billion from US$106.9 billion. Analysts had expected slightly lower revenue of US$104.4 billion.

For 2013, IBM expects earnings of at least US$15.53 per share. It expects adjusted earnings of at least US$16.70, above the US$16.65 that analysts were expecting.

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