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IBM's forecasts strong earnings

/ Source: The Associated Press

International Business Machines Corp. told Wall Street to raise its 2008 estimates Thursday, further boosting a stock that was already buoyed by strong fourth-quarter earnings.

IBM's chief financial officer, Mark Loughridge, said earnings would be between $8.20 and $8.30 per share in 2008. Coming into Thursday, analysts polled by Thomson Financial were expecting $7.94 per share in 2008.

In the last three months of 2007, IBM earned $3.95 billion, or $2.80 per share, on revenue of $28.9 billion. The profit rose 12 percent from a year earlier, when IBM made $3.54 billion, $2.31 per share, on revenue of $26.3 billion.

That 10 percent revenue gain would have been 4 percent if not for weakness in the dollar. Payments in other currencies now translate into more dollars.

IBM had released the per-share and revenue figures Monday because the numbers were well beyond Wall Street's expectations. Analysts had been expecting $2.60 per share on revenue of $27.8 billion.

That initial release indicated that IBM's broadening international focus was shielding the company from the crisis in the financial industry, which supplies more than one-fourth of IBM's revenue. But Thursday's full report offered more details about IBM's status and offered insights into overall corporate technology spending, which is expected to see slowing growth this year.

Loughridge acknowledged that "we have an uncertain economic environment that we're working through along with the rest of the business world." But he expects IBM to be carried by its investments in developing markets, saying that the chance to put down technological infrastructures in such places as Eastern Europe, Vietnam and China amounted to "the gold rush of the 21st century."

The earnings report showed that Armonk, N.Y.-based IBM continues to increase its reliance on software, its most profitable product line. The software division's revenue rose 12 percent to $6.3 billion. The gain would have been just 6 percent if not for weakness in the dollar.

Services revenue rose 17 percent to $14.9 billion. The increase would have been 10 percent at constant dollar values.

In another closely watched measure of IBM's strength in services, the unit signed $15.4 billion in new contracts in the fourth quarter, down 13 percent. Those signings reflect revenue that will flow to the company in the coming years.

The hardware division's revenue dropped 4 percent to $6.8 billion. The revenue figure would have been flat from a year earlier if not for IBM's 2007 divestiture of its printing division.

A weak spot in the segment was IBM's crucial mainframe business, which saw a 15 percent sales decline. Loughridge said customers appeared to be waiting for a new mainframe model being released this winter.

Even with that dip in mainframes, the hardware division's profits still rose 18 percent.

For all of 2007, IBM earned $10.4 billion, $7.18 per share, on revenue of $98.8 billion. Those figures all rose from 2006, when IBM made $9.5 billion, $6.11 per share, on revenue of $91.4 billion. The revenue gain of 8 percent would have been just 4 percent at constant currency values.