Fourth-quarter profit at International Business Machines Corp. rose 11 percent and easily beat Wall Street expectations Thursday, and the company also delivered a blockbuster figure in services contract signings, an important measure of future revenue.
In the last three months of 2006, IBM earned $3.54 billion, $2.31 per share, on revenue of $26.3 billion. The numbers were boosted $76 million, or 5 cents per share, because of gains just now landing on the books from long-discontinued operations.
Even without that gain, IBM would have shown $2.26 per share, and on that basis, the results beat the consensus estimates from analysts surveyed by Thomson Financial. Wall Street was expecting profit of $2.19 per share and revenue of $25.7 billion.
The figures all beat last year’s results, when profit was $3.19 billion, $1.99 per share, and revenue was $24.4 billion. However, profit in that comparison quarter was dragged down about $200 million after taxes, or 12 cents per share, by a one-time accounting charge and costs IBM incurred in freezing its pension plan.
In one sense, this quarter’s performance echoed much of the way 2006 played out at IBM. The company struggled to find overall sales growth but rode cost cuts and software acquisitions to higher profits.
However, by another closely followed measure, services signings, IBM’s fourth quarter might have marked a turning point. The company signed $17.8 billion in services contracts, a hefty leap from $10.5 billion in the prior quarter and $11.5 billion a year ago.
That could further galvanize investors who have already sent IBM’s stock on a tear the past six months. Before the earnings report, the shares fell 57 cents to $99.45 on the New York Stock Exchange, still near their 52-week high.