IBM revenue up as it steals rivals’ customers

Evan Gower July 19, 2011

IBM’s revenue jumped 12% as it gained customers at its services division, trouncing expectations and raising hopes that 2011 will be a good year for the technology sector.

IBM revenue up as it steals rivals' customers

The good news from the tech bellwether comes as Apple and Microsoft are also set to announce record results.

IBM said signings of new business at its services division surged 16% in the second quarter to $14.3 billion, and sales of IBM’s Unix server computers rose 12% from a year earlier.

The company said it won more than 250 server accounts away from rivals, resulting in over $300 million in sales. About 60% of this came from Oracle and 30% from HP, IBM said. Neither company would comment.

Investors had feared that technology sales would slow in the second half, hurt by the economic uncertainty in Europe and Japan, as well as a drop in government spending. But IBM offset those challenges with strong growth in developing markets from Brazil to China, and robust sales of a new line of mainframe computers.

IBM reported second-quarter profit, excluding items, of $3.09 per share, beating the average Wall Street forecast of $3.03, according to Thomson Reuters. Revenue rose 12% from a year earlier to $26.67 billion, ahead of the average forecast of $25.35 billion.

Other results

Analysts hope IBM’s success is just the first in a series of positive results posted this week.

“As I look for the balance of the earnings reports this week, I think it’s going to set a pretty good tone,” said Keith Wirtz, chief investment officer for Fifth third Asset Management.

Infographic

Should Microsoft replace Ballmer as CEO?

Apple is expected to report another dazzling quarter today, propelled by strong demand for its perennial bestseller iPhone and the new, thinner iPad 2 tablets.

Investors are looking for a 60% increase in revenue for the June quarter but all eyes will be on the outlook for the second half of the year, which Wall Street is betting will be huge as it may include the launch of a new iPhone, its best-selling product that accounts for about 40% of its revenue.

Microsoft is set to post a 9% jump in fiscal fourth-quarter profit on Thursday, putting the cap on its best financial year ever, but investors are fidgety over flagging computer sales and a gnawing feeling that the tech pioneer will never recapture old growth rates.

Microsoft’s fourth-quarter sales are expected to push annual revenue close to $70 billion for the first time, slightly more than Apple’s last fiscal year.

But records are not enough for investors, who are more focused on internet services and mobile gadgets from Apple, Google and Facebook.