- Associated Press - Monday, July 19, 2010

SAN FRANCISCO (AP) - Analysts were concerned with one aspect of IBM Corp.’s second-quarter financial report: The value of services contracts signed fell 12 percent to $12.3 billion.

IBM is the world’s biggest information-technology services company, and inking new services deals is critical for growth.

On a conference call with analysts, IBM’s chief financial officer, Mark Loughridge, discussed the forces behind the decline.

QUESTION: You mentioned that signings were down because new extensions didn’t come in. Is that an anomaly or a trend? How should investors think about signings as we look into the second half of the year?

ANSWER (Loughridge): “We believe that last year we had a high level of extensions because our customer base was wrestling with the economic difficulties of the recession. And there were a lot of contract renegotiations, and in part of those contract renegotiations we saw a number of extensions. But I think, frankly, as we worked with the operational team, we believe the bulk of that trend is in the rearview mirror. And I do think it is quite reasonable to be encouraged by the strong growth rate that we did have in new business content. That is what really led us to project on a forward-looking basis that we ought to have improving revenue characteristics.”

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