Gains in Tech Services Drive IBM’s Earnings

IBM Corp.’s second-quarter earnings rose significantly and matched Wall Street’s expectations, driven largely by strong growth in the technology services division, the company said Wednesday.

The results were sure to be closely scrutinized by investors eager for signs of a broad recovery in the high-tech sector, which saw an upbeat report Tuesday from chip-making giant Intel Corp.

From April through June, IBM had net earnings of $1.7 billion, or 97 cents a share, up from $56 million, or 3 cents a share, in the comparable period last year. Last year’s figures were dragged down by $1.4 billion in one-time charges.

Revenue rose 10% to $21.6 billion, though without currency fluctuations the increase would have been 3%.

Taking discontinued operations out of the mix, IBM said it would have earned 98 cents a share, matching the forecast of analysts surveyed by Thomson First Call.

“Once again, IBM delivered a solid quarter despite the challenging economic environment,” said Samuel J. Palmisano, IBM’s chairman and chief executive.

John Joyce, IBM’s chief financial officer, said the company was on track to meet analysts’ revenue and profit forecasts for all of 2003.

But he was not holding out hope for an economic revival in the next five months.

“I don’t have to remind investors that second-half economic recoveries were expected back in 2001 and again in 2002,” he said on a conference call. “We are going to take a more pragmatic view.”

The earnings report came out after shares of Armonk, N.Y.-based IBM rose 30 cents to close at $86.74 on the New York Stock Exchange. The stock fell to $84.55 in after-hours trading.

Services sales jumped 23% from the same period in 2002, helped by IBM’s acquisition of the PricewaterhouseCoopers consulting firm. Software revenue rose 6%.

Those successes helped overcome a 0.9% drop in hardware sales and an 18.4% plunge in financing revenue.