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UPDATE 3-IBM confident in outlook despite slow economy

* IBM repeats 2010 EPS outlook of $10-$11

* Says 2009 EPS of $9.20+ possible with 7 pct revenue fall

* CEO says will not do “crazy deals”

* Shares down 1.62 pct (Adds details on earnings outlook)

NEW YORK, May 13 (Reuters) - IBM IBM.N reaffirmed its earnings outlook for this year and 2010, saying its focus on high-margin software and its geographic diversity would help buffer the impact of a weak economy.

Chief Executive Sam Palmisano said on Wednesday that International Business Machines Corp is still targeting earnings of $10 to $11 per share for 2010, slightly above the average analyst estimate of around $9.90, according to Reuters Estimates.

The company also repeated its earnings forecast of “at least $9.20” per share in 2009. That compared with the average analyst forecast of $9.11.

Chief Financial Officer Mark Loughridge said IBM’s targets were possible even if revenue at constant currency, which excludes the impact of currency fluctuations, fell 7 percent in 2009, or was flat in 2010.

Over the past decade, IBM has been shifting its focus to software and services from increasingly commoditized hardware. Palmisano said this means it can rely on a steadier stream of revenue, rather than more volatile equipment sales.

Software and services account for around 80 percent of IBM’s revenue, compared to around 50 in 2000.

“We are not like the other companies in the IT industry,” Palmisano said at an annual meeting with analysts in New York. “We don’t have the dependency.”

IBM’s first-quarter revenue fell 11 percent, or around 4 percent at constant currency, from a year earlier, but cost cuts helped limit the fall in net profit. Analysts are expecting revenue to fall 7.5 percent in 2009 and rise 2.1 percent in 2010, according to Reuters Estimates.

Palmisano also believed it was now a perfect opportunity to invest in future growth, but the company would not do “crazy deals.” The priority of any acquisition would be successful integration rather than deal size, he said.

“It’s not about size, it’s about success odds -- can we integrate this, can we get the financial returns,” he said.

IBM last month failed to clinch a deal for server and software maker Sun Microsystems Inc JAVA.O, which agreed to be bought by Oracle Corp ORCL.O instead for more than $7 billion.

IBM shares fell 1.62 percent to $102.26 on the New York Stock Exchange, a more moderate decline for key U.S. indices. (Reporting by Ritsuko Ando; Editing by Dave Zimmerman, Andre Grenon, Richard Chang)

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