I.B.M. - Tops Forecasts for the Quarter.

I.B.M. reported a solid 12 percent gain in net income for the fourth quarter, bucking the trend of steep declines for many technology companies amid the economic downturn and surprising Wall Street. The company is seen as a bellwether of global technology spending among corporations.

Yet its strong performance in the fourth quarter, analysts say, mainly points to the success of its strategy in recent years of tilting toward higher-profit software and services and reducing its reliance on the computer hardware business, which suffers more in down economic cycles.

I.B.M.’s hardware sales did drop 20 percent in the quarter, but that weakness was more than made up by strong results from the company’s far-larger services and software groups. Some analysts had predicted that I.B.M. would announce as many as 10,000 staff cuts, or 3 percent of the work force, to trim costs in a weak economy.

I.B.M.’s solid profit performance came largely from higher profit margins in the services and software businesses that now account for more than 80 percent of the company’s earnings. In a difficult economic environment, I.B.M. has apparently been successful in convincing corporations and government agencies that its technology would deliver gains in efficiency.

I.B.M. reported net income of $4.4 billion, a 12 percent gain from a year earlier. Its quarterly earnings were $3.28 a share, well above Wall Street’s consensus of $3.03 a share. The company’s profits benefited by 16 cents a share from foreign tax credits and the new research tax credit in the United States. Read more here (source).