IBM Keeps The Good News FlowingIBM Keeps The Good News Flowing

IBM offered more hope that the long slump in tech buying may be nearing an end, reporting earnings Thursday that beat analysts' expectations and affirming the previous day's comments by chipmaker Intel that IT spending by businesses is on the rise.

IBM reported that net income more than doubled in the fourth quarter to $2.71 billion, compared with $1.02 billion a year ago. Earnings per share were $1.55, exceeding Wall Street expectations of $1.50 a share. A year ago, IBM posted earnings of 59 cents per share due to losses from discontinued operations.

CEO Sam Palmisano said in a statement Thursday that the IT buying environment is "steadily improving." In a conference call with investors, CFO John Joyce contrasted that outlook with more cautious forecasts IBM had offered in previous quarters. He also said strong sales of IBM's large computers show that businesses are updating their IT infrastructure. Intel said Wednesday in reporting strong quarterly earnings and sales that it's starting to see resumption in business-technology spending. The technology industry has been mired in a three-year slump in IT spending that hurt tech companies' earnings and pushed down stock prices. But industry executives have been hopeful that that period is coming to an end.

Despite the bullish outlook, the bulk of IBM's fourth-quarter revenue gains came from the effects of a weaker U.S. dollar. Revenue from continuing operations for the fourth quarter rose 9.4% to $25.9 billion, compared with $23.7 billion in the year-ago quarter. Currency-translation gains accounted for most of the rise--IBM's sales grew only 1% based on constant currency, but the weakness of the U.S. dollar vs. foreign currencies lifted sales results in Europe and Asia after those sales were translated into dollars.

In IBM's business segments, sales of IT services grew 8% compared with the year-ago quarter, and the company's systems group--which sells large business computers--posted an 18% sales gain. Software revenue increased 12%. But revenue at IBM's semiconductor-making technology group revenues fell 20%, and the unit continued to lose money. Sales at IBM's personal systems group grew 16%, and the unit made a small profit on the strength of laptop sales.

For the full year ended Dec. 31, IBM's net income more than doubled, to $7.6 billion. Revenue rose 9.8%, to $89.1 billion.

IBM's earnings report was originally scheduled to be released on Jan. 20. A spokesman said the report was moved up because the company had finished preparing its numbers earlier than expected. The report came less than 24 hours after strong earnings releases from Apple, Intel, and Yahoo. Also, two research firms said Wednesday that computer unit sales grew at a double-digit clip in 2003 for the first time since 2000, though low prices for PCs kept revenue flat.