IBM reports 20% jump in Q3 net income

IBM on Wednesday reported a 20% increase in net income for its third quarter and said its profit outlook for the full year remains on track.

The preannouncement came one week before IBM is due to report its full financial results on Oct. 16 and may help calm technology investors, who have been pummelling stocks amid fears of a spending slowdown caused by the U.S. financial crisis.

On Monday, software vendor SAP said concern about the financial crisis among its customers led to a "very sudden and unexpected drop in business activity" at the end of its third quarter.

IBM suggested that the broad scope of its business will help it to better weather the crisis.

“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,” Sam Palmisano, IBM's chairman, president and CEO, said in a statement. “We remain confident in our full-year outlook.”

IBM reported revenue for the third quarter of $25.3 billion, up 5% from the year before, including 3 percentage points from favorable exchange rates. Net income climbed 20% to $2.8 billion, with earnings per share up 22% to $2.05.

The earnings beat the expectations of financial analysts by $0.03 per share, but the revenue figure is considerably lower than the analyst forecast of $26.5 billion.

IBM reaffirmed its full-year outlook for earnings per share of at least $8.75, which would be an increase of 22% over fiscal 2007 and one penny short of the analyst forecast. IBM didn't provide a revenue estimate for the full year.

Shares in IBM were down 5% at the close of normal trading Wednesday, at $90.55. They had climbed 4% higher in trading after hours at the time of this report.

The IDG News Service is a Network World affiliate.