IBM revenue falls 11 per cent

IBM said on Monday first-quarter revenue fell to 21.71 billion from 24.50 billion a year earlier.

IBM8217;s quarterly revenue fell by a bigger-than-expected 11 per cent as the slowdown in corporate spending hurt even one of the healthiest US technology companies.

But higher margins helped International Business Machines Corp8217;s first-quarter profit beat Wall Street estimates,and the company affirmed its full-year earnings outlook 8212; helping to limit the fall in IBM shares to 1.6 per cent after hours.

8220;These were decent results in light of the challenging economy. Certainly the top line is being impacted by the weak economy,8221; said Andy Miedler,analyst at Edward Jones.

8220;IBM is managing the business well,focusing on expense control,and its movement to software and services is clearly evident in the increasing profitability. Net-net we think this is a decent quarter.8221;

IBM said on Monday first-quarter revenue fell to 21.71 billion from 24.50 billion a year earlier. That compared with analysts8217; average forecast of 22.56 billion,according to Reuters Estimates.

Net profit for the quarter dropped 1 per cent to 2.30 billion,from 2.32 billion in the year-ago quarter.

Profit per share,however,rose to 1.70 from 1.64,as the number of shares outstanding decreased. Analysts on average were expecting 1.67 per share,according to Reuters Estimates.

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8220;Short-term bookings look a little weaker than everybody had hoped. That probably means that the next quarter will be mixed. The long-term guide looks solid,8221; said Peter Misek,analyst at Canaccord Adams.

MARGIN IMPROVEMENT

IBM has so far fared better than many other technology companies,thanks to its growing focus on software and services,such as outsourcing and technology support.

The company has moved to a more profitable revenue mix over the past decade,dumping increasingly commoditized hardware for software and services. Gross profit margin rose to 43.4 per cent in the quarter from 41.5 per cent a year earlier.

Despite the fall in revenue,IBM reiterated its outlook for a full-year profit of at least 9.20 per share. Chief Financial Officer Mark Loughridge said on a conference call that he was more confident in that outlook now than he was last quarter.

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Chief Executive Samuel Palmisano was upbeat about the following year as well.

8220;We remain ahead of pace for our 2010 roadmap of 10 to 11 per share,8221; he said in a statement.

Wall Street has been hoping that the first quarter would mark the bottom of the downturn for the tech sector,eyeing an improvement in demand in the second half of this year.