IBM beats 2Q profit estimates, posts $4.3 billion net income

Falling revenue, notwithstanding, IBM beat profit estimates with better than expected results for the second-quarter ended 30 June 2013, which lifted the company's shares in post-market trading.

Analysts had projected IBM's net income at $4.19 billion on $25.37 billion revenue in the quarter, as per a Reuters report.

The company posted second-quarter net income of $4.3 billion, excluding certain charges, on revenue of $24.9 billion. Excluding those charges, earnings per share stood at $3.91, up 8 per cent.

Shares of IBM were up nearly 3 per cent at $199.93 in after-hours trading following the earnings news.

IBM's net income increased by 3 per cent even as revenue slided 3 per cent for the quarter. 

US demand for IBM's business remained stable even though state and local government spending remained weak, Reuters reported citing analyst firm Bernstein Research.

According to Bernstein, international demand posed questions for IBM given economic concerns in Brazil and China.

IBM earnings would now be expected at $16.90 a share in 2013, up from the $16.70 it forecast earlier this year, according to Bloomberg.

IBM managed to boost profit by shifting away from low-margin businesses, cutting jobs and repurchasing stock -- even on declining revenue. The company is expecting faster-growth areas, including cloud computing and data analysis, to offset a broader slowdown in IT spending.

The shares climbed as much as 4.1 per cent to $202.50 in late trading after the results were released. The stock closed at $194.55 in New York yesterday, up 1.6 per cent this year, trailing an 18 per cent gain for the Standard & Poor's 500 Index.

With better than expected earnings, IBM also recovered from its setback in the previous quarter, when its profit failed to come up to projections for the first time in eight years.

Sales were down in every IBM business division, apart from software.

In addition to a demand slump, currency changes too adversely impacted IBM's results last quarter. In Japan, where the company made about 10 per cent of its sales last year, the yen was down 5 per cent against the dollar in the second quarter. According to chief financial officer, Mark Loughridge, the company was ''significantly impacted'' by the yen's weakness.

He said, because the company's business in Japan was more heavily skewed to local services, the company had less ability to hedge cross-border cash flows as compared to most other countries.