IBM increases earnings forecasts

IBM has cut costs to boost profits

Computer giant IBM has raised its earnings forecast and posted quarterly profits ahead of expectations, even though sales and revenue fell.

The firm said it expects 2009 earnings of at least $9.70 (£5.80) per share, from a previous estimate of $9.20.

Cost cuts and a shift to more profitable business boosted profits, which rose 12% year-on-year to $3.1bn.

Analysts welcomed the results, even as sales fell to $23.3bn in the period to 30 June from $26.8bn a year before.

Mike Holland, chairman of investment firm Holland & Co, said: "The full-year guidance for $9.70 was incredible."

"I have never seen anything like that in the years I have been following IBM. In an unpleasant economic and financial world, these are incredible results."

Sales have fallen after corporate spending dropped, but this was countered by cost cuts and a shift to more profitable businesses.

The firm has been seeking to raise profit while cutting costs by automating tasks and shifting its workforce to less expensive locations.

"We are optimistic about how IBM is positioned to make the most of current growth opportunities as well as those that emerge as the economy recovers," said IBM's chairman and chief executive, Sam Palmisano.

Shares in the firm rose 1.4% to $112.19 in after-hours trading.