- The Washington Times - Monday, April 20, 2009

SAN FRANCISCO (AP) - IBM Corp.’s first-quarter results slipped as all its major business units suffered declines, but the company backed its bullish outlook for 2009 on Monday, reflecting its belief that a broad mix of services and software will help it weather the recession.

The Armonk, N.Y.-based company’s profit beat Wall Street’s forecast, but sales fell short. The stock fell 2.2 percent in after-hours trading Monday.

IBM reported after the market closed that that its profit was $2.30 billion, or $1.70 per share. That was higher than the $1.66 per share analysts were expecting.

In the same period last year, IBM earned $2.32 billion, or $1.64 per share.

Sales fell 11 percent to $21.7 billion, $800 million short of the $22.5 billion analysts polled by Thomson Reuters were expecting. IBM said the revenue drop would have been 4 percent were it not for the effects of a strengthening dollar.

The company reiterated its previous guidance for earnings of $9.20 per share in 2009.

The earnings report came on the same day that longtime rival Sun Microsystems Inc., which had recently been in talks to be bought by IBM, announced a $7.4 billion deal instead with Oracle Corp.

IBM pointed to its better profit margins in services and software, which together contribute more than 80 percent of IBM’s revenue. IBM is banking on strength in those areas, which can be successful in a downturn by helping companies save money, to offset steep declines in servers and other hardware.

Services revenue was $13.2 billion, down 10 percent. Software sales were $4.5 billion, a 6 percent decline.

Hardware sales took a bigger hit, falling 24 percent to $3.2 billion. Sales of both high-end mainframe computers and industry-standard servers showed double-digit declines.

In another closely watched indicator for IBM, it signed new services contracts worth $12.5 billion in the first quarter, a decrease of 1 percent from last year. Were it not for currency fluctuations, the value would risen 10 percent, IBM said. These contracts represent revenue that will be booked in the coming years.

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