1A — IBM earnings soar

By Bob Freund

Post-Bulletin, Rochester MN

Rochester IBM helped power an outstanding quarter for IBM Corp.

Shares surged to a six-year high after the technology company surprised analysts by reporting a 26 percent jump in quarterly earnings and by boosting its full-year forecast. The stock surpassed $124 in extended trading, its highest mark since 2002. It opened this morning at $122.39.

The provider of technology services, software and server computers said it earned $2.32 billion, or $1.65 per share, in the first quarter. That was well ahead of its profit of $1.84 billion, or $1.21 per share, in the same period of 2007.


Revenue rose 11 percent to $24.5 billion, better than the $23.7 billion expected by analysts surveyed by Thomson Financial. The consensus earnings forecast was $1.45 per share.

Rochester highlights

Sales of the locally made models of the System p line of business computers — newly outfitted with IBM’s fastest processor for servers — soared 59 percent from a year earlier.

However, sales of Rochester’s System i line of servers, now on the way out as a brand, slid 21 percent. Beginning Friday, the longtime System i is disappearing into what IBM now labels as a "converged System p," running on new Power6 processors.

Power6-related sales, along with IBM Corp.’s newest mainframe, won repeated note from Chief Financial Officer Mark Loughridge as strong points in Wednesday’s quarterly wrap-up. They came amid some weakness, as sales of Big Blue’s hardware business declined 7 percent from the same time in 2007.

But the major sales power came from IBM’s two mammoth service and consulting operations. They accounted for 60 percent of the company’s $24.6 billion in revenue from January through March, up 11 percent from the prior year.

The performance was encouraging enough for Loughridge to raise IBM’s projection for 2008 earnings by another 25 cents, to "at least" $8.50 a share. "We got off to a really great start," he said.



IBM clearly expects more sales power from its Power6 machines and the new mainframe. The addition of new processors to the biggest models in the System p line was just announced April 8, and customers had been holding off buying those boxes, Loughridge said. While the mid-range models are produced at Rochester, the largest ones are made in New York.

The new z10 mainframe server — being sold to big companies as a way to consolidate machines and save money — boosted mainframe sales 10 percent on only about a month of sales in the quarter.

The Associated Press contributed to this article.

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