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IBM's bolt from the Blue: Profits top Wall Street expectations

IBM Chairman and CEO Sam Palmisano (IBM photo)

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RESEARCH TRIANGLE PARK, N.C. — Like a bolt from the blue, IBM gave global stock markets and especially tech stocks a shock of good news with an early release of quarterly earnings that beat Wall Street expectations.

With IBM shares plummeting to $90 and analysts warning that Big Blue was in trouble amidst the economic crisis threatening to flatten the world, Chairman Sam Palmisano came forth a week early to throw a lightning bolt like some corporate Zeus. Take that, doubters and naysayers!

Making the profit announcement even better, Palmisano affirmed IBM profit guidance at better than $8 for the year. The quarterly profit hit $2.05, better than the $2.01 analysts had forecast.

That’s good news for shareholders – and Big Blue workers. No doubt IBM’s more than 10,000 employees in the Triangle are breathing easier today about their jobs, portfolios and 401Ks.

Traders reacted immediately to the report, sending IBM (NYSE: IBM) shares up more than 6 percent in after-hours trading. And given IBM’s size as the world’s top technology company, the news could help resuscitate markets that need a shock from a defibrillator. Or a lightning bolt.

Here is reaction from some analysts to the news:

“In this environment, the combination of meeting current expectations but also reaffirming their outlook is an incredible performance. For companies to be reaffirming their outlook through the end of the year is h-u-g-e.” – Mike Holland, Holland & Co., to Reuters

``IBM demonstrated the versatility of their model and their ability to manage their business.'' – David Grossman,Thomas Weisel Partners, to Bloomberg.

``It's nice to have some positive news in the tech space.'' – Chuck Jones, Atlantic Trust Private Wealth Management, to Bloomberg.

"It's relief. That's why the stock's rallying. It seemed like a global freeze happened in late September and extended, so it's nice to see the biggest companies are still dealing with the biggest of their suppliers ... the markets are still moving along, demand is still there." – Pete Misek, Canaccord Adams, to The Associated Press.

In a statement, Palmisano said IBM’s diversification in services, products and geography is helping the company weather the storm pummeling markets.

“Our results demonstrate that the combination of a steady base of recurring revenue and profits, investments for growth in emerging markets, a range of products and services that deliver value to clients, and a strong and flexible financial foundation give IBM a competitive edge in good times and tough times,” he said.

“We remain confident in our full-year outlook.”

That final remark is especially important to analysts, who believe the global slowdown will lead to reduced spending on information technology.

So why did IBM release its earnings news earlier than expected? Well, it did the same thing earlier this year at a time when its stock was flagging.

``With the market conditions the way they are, we felt it was important to get our results out as soon as possible,'' IBM spokesman Ian Colley told Bloomberg.

Amen to that, brother.

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