IBM keeps 2009 outlook and sees services growth

NEW YORK (Reuters) - IBM IBM.N affirmed its full-year profit outlook on Thursday and forecast growth in its services business in the first quarter, in sharp contrast to many technology companies that have scaled back expectations.

A view of the IBM facility outside Boulder, Colorado October 18, 2006. REUTERS/Rick Wilking

Shares of International Business Machines Corp rose 3.7 percent, after Chief Financial Officer Mark Loughridge also said January’s results were consistent with the company’s forecast for at least $9.20 in earnings per share for 2009.

“We feel pretty confident, and we still feel confident in our view that we’ll achieve at least $9.20 for the year,” he told a Goldman Sachs technology conference.

The affirmed forecast comes a week after IBM rival Hewlett-Packard Co HPQ.N cut its full-year outlook amid weak sales of printers and personal computers.

IBM’s fourth-quarter earnings, as well as its 2009 outlook, had exceeded market expectations. The company has credited its relative strength to its expansion from hardware to higher-margin businesses like software and services.

Contract signings for business services have grown so far this year, Loughridge said.

“On a quarter-to-date basis, our long-term signings are up double digits, and we would expect signings to be up for the quarter on a year-to-year basis and double digits on long-term. So I think we have a good hand,” he said.

Contracts for IBM services, including outsourcing and technology support, can range from less than a year to over 10 years.

Loughridge added that IBM has a good pipeline in software in the first quarter.

IBM has also said its expansion overseas has been helping its business. The company earns around two-thirds of its revenue from outside the United States.

Revenue in growth markets in January outpaced growth in major markets by 7 points, Loughridge said, generally in line with the trend in 2008, as customers in emerging economies built out infrastructure.

Loughridge also said that IBM was repurchasing its shares in the open market, and that it had good free cash flow performance in January.

Shares rose $3.18, or 3.7 percent, to $89.08 by early afternoon.

Reporting by Ritsuko Ando; Editing by Derek Caney