In dreary times, IBM sunny about 2009

SAN FRANCISCO: In what promises to be a dismal year for tech spending, IBM Corp packed a wallop of a surprise with its 2009 profit guidance: the numbers were so far ahead of Wall Street's forecast they were initially met with disbelief.

The Armonk, New York-based Company predicted at least USD 9.20 per share in profit in 2009, a full 45 cents per share better than the average estimate of analysts polled by Thomson Reuters.

The forecast is an extremely bullish statement by IBM. It reflects the company's belief that it can outmanoeuvre the financial crisis by focusing on services and software deals that carry big profit margins, but also help businesses cut costs by offloading some of their tech chores.

IBM revealed the rosy forecast yesterday as it reported profit for the fourth quarter of 2008 that also sailed past analyst estimates, while sales fell short.

IBM's net income for the period was USD 4.4 billion, or USD 3.28 per share. That amounted to a 12 per cent profit increase from USD 3.95 billion, or USD 2.80 per share, in the same period a year earlier.

Analysts were expecting IBM to earn USD 3.03 per share this time.

IBM shares jumped 4 per cent in extended trading. "To be honest, I didn't believe they could show something like this - I think the results they posted were stellar," said Peter Misek, an analyst with Canaccord Adams.

"They just executed really well - really, really, really well.''

IBM's results show that while the company has seen some sales vaporise, it is still able to wring out better profits because of aggressive cost-cutting and by focusing only on the most profitable deals.