IBM Corp. (NYSE: IBM) is again backing its forecast for profit of $9.20 per share this year even as it prepares for growth with new products and services.
The world’s largest information technology company is standing by its bullish forecast because it says it’s making better profit margins in its services and software divisions as it continues to cut costs aggressively, offsetting weakening sales.
employs more than 10,000 people at its campus in Research Triangle Park, N.C.
Also Wednesday, IBM rolled out its , a new software it says can analyze “massive amounts of data” in real time for faster analytics capability.
Called “IBM System S,” it is designed for “perpetual analytics – utilizing a new streaming architecture and breakthrough mathematical algorithms, to create a forward-looking analysis of data from any source – narrowing down precisely what people are looking for and continuously refining the answer as additional data is made available,” IBM said in a statement.
To support System S, IBM opened it’s a stream computing center in Dublin, Ireland. It will serve as a hub of research, customer support and advanced testing, IBM said.
System S “trial code” is available to clients at no cost, IBM added.
“System S software is another example of IBM helping clients through our long-term investments in business analytics and advanced mathematics,” said John Kelly III, IBM’s senior vice president and director of IBM Research. “The ability to manage and analyze incoming data in real time, and use it to make smarter decisions, can help businesses and other enterprises differentiate themselves.”
The financial forecast is surprisingly high and shows IBM’s confidence in its ability to wring out more profits even in tough times.
IBM’s chief financial officer, Mark Loughridge, reiterated the guidance at an investor meeting Wednesday in New York, where Chief Executive Sam Palmisano also made a rare public appearance.
In his comments, Palmisano emphasized IBM’s growth in services.
"We think that this space will be as large as Enterprise Resource Planning (software) in the next five years," he said, according to TheStreet.com. "Services has been a terrific story — we now have the best margins in the service business of anybody."
The Street noted that IBM’s overall gross profit margin was 43.4 percent in the first quarter, an increase from 41.5 percent a year earlier, with services and software margins both increasing.
Reuters noted that software and services account for around 80 percent of IBM’s revenue, up from some 50 percent in 2000.
"We are not like the other companies in the IT industry," Palmisano noted about IBM’s diversity in product offerings.. "We don’t have the dependency."
Palmisano also said IBM will invest in future growth but would not do whatb he called "crazy deals."
IBM recently backed out of a possible acquisition of Sun Microsystems. Sun later agreed to be bought by Oracle.
As part of its growth strategy, IBM also recently launched an analytics business unit that Big Blue sees as a $2 billion business.
"Analytics will be pervasive across all of our consulting practices," said Frank Kerns, senior vice president for global business services "Clients are struggling today with massive amounts of data — exploding amounts of data."
Analysts on average are predicting 2009 profit of $9.11 per share, according to a poll by Thomson Reuters.
In the latest quarter, IBM’s profit dipped slightly to $2.3 billion, while sales fell 11 percent to $21.7 billion.