Page last updated at 14:43 GMT, Friday, 18 July 2008 15:43 UK

Cost-cutters boost IBM's results

IBM sign
Many investors see IBM shares as a safe haven from the US downturn

IBM's profits have come in better than expected, helped by cash-strapped companies calling it in to help cut costs and improve IT infrastructure.

Net profit for the three months to the end of June came in at $2.77bn, which is up 22% on the same period of 2007.

IBM also raised its own forecast for earnings for the whole of 2008.

The company has also benefited from the weakness of the US dollar, as it means that its earnings from outside the US are more valuable.

The news sent shares up $1.90, or 1.5%, to $128.42.

The company's sales jumped 13% in the three month period, but the increase would only have been 6% without the effect of the weaker dollar.

Safe haven

About two-thirds of IBM's revenue comes from non-US sources.

"They're focusing outside the US to ride through the domestic downturn," said Zach Rosenstock from Wayne Hummer Wealth Management.

Many investors see IBM as a safe haven against the US economic slowdown. Its shares have risen about 17% this year, compared with a 15% fall on the Dow Jones Industrial Average.

IBM said it was still concerned about the economies of some of the biggest industrialised nations, but added that its concerns were already factored into its forecasts.

New service contracts, which are a key indicator of future growth, grew 12% to $14.7bn in the quarter.

IBM's results impressed Wall Street much more than Google's and Microsoft's figures, which came out at the same time and were below expectations.




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