Meltdown, what meltdown? IBM Q3 profit up 20%

All tech stocks have taken a pasting recently, hit as much as any sector by the global financial crisis.

But it’s still unclear whether tech companies are being hurt by the worldwide slowdown.

In IBM’s case, the answer is no.

The company was due to release its third-quarter results on October 16, but rush-released them today in an effort to staunch a slide in its stock, which is down 18% for the week so far – in line with other blue-chip techs – closing the current NYSE session at $US90.55 a share (down from $US120 as recently as September 1, and off a 52-week high of $US130).

It was easy to see why Big Blue was keen to preannounce. Income was up 20% on a US dollar basis to $US2.8 billion ($US2.02 a share), 3% of analysts’ predictions.

IBM is also on track to achieve its full year earnings goal of $US8.75 a share, says its Chairman and CEO Sam Palmisano. A growing emphasis on long term service contracts in the US, and high growth for the company in China, India and other emerging markets account for IBM’s strong results, Mr Palmisano says. IBM’s central role in the cloud computing boom won’t be hurting it, either.

There was some evidence of the slowdown. Revenue for the quarter grew 5% to $US25.3 billion, half analysts’ expectations.

But traders focussed on the good profit news and confident out, and in after hours trading, the IBM’s shares rebounded $US5.45 to $US96.00

In the year 2000, tech stocks led the NASDAQ and Dow declines, with their sky-high valuations correctly blamed for creating the bubble.

Today, the reverse is true. Fuelled by the Web 2.0 boom, many techs are seeing solid results, but their valuation dragged down by the general market.

Many, but not all. Among the global giants, the outlook remains mixed. Oracle has shared IBM’s strong results and positive outlook, but SAP results disappointed this week, Dell has warned its being hit by a global slow-down and HP has announced mass lay-offs.


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