IBM stock gets a boost from 4Q results, outlook

IBM shares jump after software strength boosts 4th-quarter results, outlook

Associated Press

NEW YORK (AP) -- Shares of IBM rose Wednesday after the technology company reported stronger-than-expected earnings and revenue for the fourth quarter, along with an outlook called "constructive" by a Sterne Agee analyst.

THE SPARK: IBM's fourth-quarter earnings grew 6 percent even as revenue was largely flat. The company was helped by growth in its software segment even as other business units saw a decline. It was the company's 40th consecutive quarter of better-than-expected earnings per share. For 2013, IBM said it expects earnings of at least $15.53 per share. It expects adjusted earnings of at least $16.70, above the $16.65 that analysts were expecting.

THE BIG PICTURE: Software was the only business segment that saw a revenue increase during the quarter. The company has been focusing on growing its software business, which has higher profit margins, over hardware.

By 2015, IBM expects software to account for more than half its total profit. In 2012, software accounted for 45 percent of IBM's profit, up from 43.5 percent a year earlier.

THE ANALYSIS: Sterne Agee's Shaw Wu called the quarter "surprisingly strong."

"What we found impressive is the company was able to accomplish this despite services (51 percent of revenue) somewhat lagging and most competitors underperforming, indicating IBM gained (market) share," he wrote in a note to investors. He rates IBM "Buy" with a target price of $230.

SHARE ACTION: The Armonk, N.Y.-based company's shares climbed $10.23, or 5.2 percent, to $206.31 in afternoon trading. The stock has traded in a 52-week range of $181.85 and $211.79.

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