REFILE-UPDATE 3-IBM's shines with fourth quarter, 2013 outlook

Tue Jan 22, 2013 10:48pm EST

(Adds dropped words in paragraph 9)
    * Q4 revenue of $29.3 bln vs Street view $29.05 bln
    * EPS was $5.39 vs $5.25, sees 2013 EPS of at least $16.70
    * Shares up more than 4 percent

    By Nicola Leske
    Jan 22 (Reuters) - IBM, the world's largest
technology services company, gave a better than expected 2013
outlook after a solid fourth quarter that analysts say has more
to do with Big Blue's smooth execution than a vibrant tech
spending environment.
    Companies had been widely expected to hold back on IT
purchases in December in part because of worries about the
so-called U.S. fiscal cliff. Automatic tax increases and
spending cuts would have been triggered had Congress not made a
deal to avert the cliff and could have pushed the weak U.S.
economy into recession. 
    But International Business Machines Corp said on Tuesday
that its quarterly results beat forecasts and it plans to
achieve earnings of at least $16.70 a share for the full year,
above analysts' consensus forecast of $16.57.
    While some analysts said IBM's earnings may be a sign of an
improved tech spending environment, others said the strong
results were specific to IBM's business model.
    "IBM is better positioned in a tough environment than most
tech companies are," said Cindy Shaw, managing director at
Discern.
    IBM made a bold strategic move a decade ago when it bought
PriceWaterhouse's consulting business and then decided to exit
the PC business, betting its future was in finding solutions to
business problems with the help of software and technology.
    That strategy appears to have paid off.
    "What IBM does better than anyone, with the exception of
Accenture, is solving problems and I am not talking about taking
out some costs, but really driving revenue," Shaw said.
    In addition, she said, IBM was strong in "hot growth
markets" such as data analytics, cloud computing, emerging
markets and what IBM calls smarter planet, which aims to improve
areas such as traffic, power grids and food production.
    Sterne Agee analyst Shaw Wu agreed, saying the success
appeared to be more specific to IBM than the industry in
general.
    "The results show that the IBM advantage and business model
- vertical integration of hardware and software - is difficult
to replicate," he said.
    "IBM has been doing this the longest and customers are very
accustomed to it. They have a much stronger offering and brand
name."
    As a result quarterly net income rose 10 percent to $6.1
billion, or $5.39 a share from $4.71 a year earlier. Revenue
dropped 1 percent to $29.3 billion due to the sale of its retail
business in the third quarter.    
    Analysts had expected the Armonk, New York-based company to
report net income of $5.95 billion, or $5.25 a share, on revenue
of $29.05 billion, according to Thomson Reuters I/B/E/S.
    Revenue grew in particular because of an 11 percent increase
in IBM's growth markets in Brazil, India, Russia and China.
    Software revenue was up 3 percent in the quarter.  
    
 
    Some analysts said IBM's better than expected results were a
sign that tech spending might not have been as bleak as
expected.
    "It is better than what people had feared," said Brian
Marshall, an analyst at ISI Group.
    "Virtually every segment did a little bit better than people
expected. It supports the fact that things are getting better
out there at least from a tech industry standpoint."
    Andrew Bartels, an analyst with research firm Forrester
Research, said: "We were expecting a lot of companies were
sitting on their wallets until it became clear what was going to
become of the fiscal cliff.
    "Given the fact it's Q4 with a cloud of the fiscal cliff,
it's a positive indication that tech software will be doing
better in the next couple of months."
    IBM shares rose more than 4 percent to $204.50 after closing
at $196.08 on the New York Stock Exchange.

 (Additional reporting by Jennifer Saba in New York and Alistair
Barr in San Francisco; Editing by Richard Chang and Andre
Grenon)