IBM's results raise hopes for Indian IT firms such as Infosys, TCS

MUMBAI: US technology giant IBM reported a second-quarter profit that beat analyst estimates and raised its full-year outlook on the growth from its software and outsourcing segment, raising hopes for better performance from its Indian outsourcing rivals.

New outsourcing signing at IBM rose $ 8.9 bn up 31% in constant currency and transactional signings rose by 14% $ 7.5 bn. IBM has been focusing on software and services as the mainframe and hardware business it once dominated loses ground.

IBM Chairman and CEO Ginni Rometty said the company had significantly increased its services backlog on growth in new business. The services backlog was up 7% in constant currency to $141 billion, the strongest growth the company has seen in four years.

IBM signed 15 deals over $100 million and multi-billion dollar deal in the second quarter.

“This was a healthy quarter from IBM, with some recovery in growth for software and services supported by a strong order backlog. Management has indicated an improving outlook for services. From an Indian IT perspective, the read-across is positive and we maintain our preference for large-caps – Infy, TCS are our top picks,” Religare analyst Rumit Duggar said in a note to clients.

Tata Consultancy Services, India’s largest IT outsourcing company, is slated to report fiscal first-quarter results later today. Analysts expect TCS to grow its revenue, as reported in dollars, by 3-4%.

Infosys, the number two player in the sector, reported stronger-than-expected revenue for the April-June quarter, last week.