IBM Q2 revenue rises 12% on buoyant demand

International Business Machines Corp (IBM), the biggest computer-services company, rose in German trading after reporting sales that beat analysts’ estimates and lifting its profit forecast amid buoyant demand for software.

Second-quarter revenue rose 12 per cent to $26.7 billion, the New York-based company said today. That topped $25.4 billion, the average estimate of analysts surveyed by Bloomberg. IBM raised its full-year earnings forecast to at least $13.25 a share, compared with analysts’ average estimate of $13.21.

Software sales advanced 17 per cent, evidence that Chief Executive Officer Sam Palmisano is making headway on efforts to bulk up in that area, in addition to services, IBM’s mainstay. Together, the divisions accounted for 80 per cent of IBM’s sales in the quarter, up from 65 per cent a decade earlier.

“They’ve done a good job of adjusting their business model so that it’s more in line with the macro trends that we see in technology,” said Joseph Foresi, an analyst at Janney Montgomery Scott LLC in Boston, who rates the company “buy” and doesn’t own the shares. “They’re very much forward-looking in their business strategy.”

The company signed global services contracts worth $14.3 billion in the quarter. Toni Sacconaghi, an analyst at Sanford C Bernstein & Co in New York, estimated contract signings of $12.8 billion.

IBM rose as much as two per cent to the equivalent of $179.69 in Frankfurt today. In the US, the stock rose as much as 2.5 per cent to $179.74 in extended trading yesterday after the results were released. It had closed at $175.28 on the New York Stock Exchange. The shares had climbed 19 per cent this year.

Even as it focuses on software and services, IBM is boosting sales of hardware, such as server computers, powerful machines that run corporate networks. Sales at the hardware division rose 17 percent as companies spent more to upgrade dated technology.