IBM Beats Preliminary Q3’08 Estimates

International Business Machines (IBM) reported today its preliminary third-quarter ’08 earnings results. The world’s largest computer-services co. beat analysts’ estimates, reiterated its annual forecast, and delivered a dose of reassuring news for its stock which has dropped nearly 18% in the last week.

IBM said its third-quarter ’08 profit rose to $2.05 per share, a 22% increase from $1.68 a share on year-over-year basis, which is $0.03 higher than analysts’ consensus estimate. Big blue also reaffirmed its previous guidance for its profits for the entire year.

Revenue posted gains as well by increasing by 5%, including 3 points of currency benefit, to $25.3 billion, compared with the third quarter of 2008. Excluding currency gains, the revenue growth was 2%. Gross margin widened to 43.3% from 41.3% in the third quarter of 2007. Pre-tax income jumped to $3.9 billion, an increase of 19% compared with the third quarter of 2007. On a dollar basis, net income rose 20%, to $2.8 billion.

Armonk, N.Y.-based IBM said that despite a softening economy, it still expects full-year ’08 earnings per share of at least $8.75. At the end of the third quarter, IBM’s current free cash flow is $6.4 billion and its cash balance was $9.8 billion.

“Our results demonstrate that the combination of a steady base of recurring revenue and profits, investments for growth in emerging markets, a range of products and services that deliver value to clients, and a strong and flexible financial foundation give IBM a competitive edge in good times and tough times,” said Samuel J. Palmisano, IBM chairman, president and chief executive officer. “We remain confident in our full-year outlook.”

After it announced its earnings results at about 6 p.m., well after the close of trading on the New York Stock Exchange, IBM’s shares gained more than 5.35%, or $5.91, to $95.90.

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