IBM Beats The Street With Help From Abroad

Weak dollar turns out to be an asset for a company with a lot of international sales. But it sold a lot of product at home, too.

Sometimes, it's all about finding the silver lining. In the case of IBM, the weakness of the U.S. dollar ended up being a strength for the company, helping the tech giant to top Wall Street's expectations for the first quarter.

IBM (NYSE: IBM) reported quarterly income from continuing operations of $2.3 billion, or $1.65 per diluted share -- a 36 percent improvement over the first quarter of 2007, when it earned $1.8 billion, or $1.21 per share.

With 65 percent of its $24.5 billion in revenue coming from outside the U.S., IBM's money made in other currencies ended up having greater dollar value.

Additionally, foreign growth further helped bolster domestic sales. Revenue in the Europe/Middle East/Asia (excluding Japan) region rose 16 percent over the prior year and Asia-Pacific sales were up 14 percent.

Even at home, IBM's performance wasn't too shabby: Stateside revenues increase 6 percent -- although Chief Financial Officer Mark Loughridge admitted the U.S. remains a tougher market.

"We had some headwinds in this quarter as customers are scrutinizing every purchase, but we also had tailwinds in currency," he said during a conference call with financial analysts.

Another key factor contributed to IBM's fortunes as well: growth in high-margin businesses. Services, for instance, accounted for 60 percent of revenue and grew 17 percent over the same quarter in 2007. Software revenues, likewise, rose 14 percent.

"This is strong proof why we believe our business model is the right one for good times and tough times," Loughridge said.

As a result of that confidence, Loughridge said IBM was raising its full-year earnings forecast by $0.25 per share, to at least $8.50 -- which would be an 18 percent increase over its 2007 results.

Other areas of IBM's business proved a mixed bag. Overall hardware sales dipped 7 percent from a year ago to $4.7 billion, but that decline would have been just 2 percent if the company had not sold its printing division last year.

However, blade server sales were up 31 percent, making the segment the most successful of IBM's hardware systems.

Additionally, revenues from System z server products increased 10 percent compared to a year ago, due to the successful launch of the new z10 mainframe.

Revenues from Big Blue's System p UNIX server products increased 2 percent over the prior year, while System i server revenue decreased 21 percent. The two product lines were recently folded into one to avoid overlap and confusion.

TAGS: server,software,IBM,earnings,financial

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