July 18, 2011 / 8:35 PM / 6 years ago

Instant view: IBM's Q2 results, signings beat Street

LOS ANGELES (Reuters) - International Business Machines Corp reported a surge in signings of new business at its services division during the second quarter, substantially beating Wall Street expectations and signaling businesses are still spending on technology.

Its shares rose 2 percent as the company also raised its forecast for full-year profit and released second-quarter results that beat Wall Street projections.

Commentary:

SHEBLY SEYRAFI, ANALYST, FBN SECURITIES

“Looks like a pretty solid report, especially with the signing number. Backlog is up, services up.”

JOSH OLSON, TECHNOLOGY ANALYST, EDWARD JONES

”All of the growth markets performed well and inline and even ahead of expectations. We saw software revenue up 10 percent on an adjusted basis, hardware continues to do well, margins were good.

”It was a good quarter, solid quarter across all sectors and we also saw service signings come up 16 percent, and that’s important as they were soft last quarter and they’re going up against easy compares.

”Good service signings reflect that they are capturing their share of the solid IT spending that we’re seeing in the market now.

”IT spending and demand for software and services remains healthy despite all this economic turmoil, and businesses continue to invest in efficiency. We’re seeing that in these results.

“Expectations are pretty high for this name right now. We’ve seen it do very well this year, up 20 percent or so to date. We just think perhaps a lot of those expectations are already in the stock price.”

BOB DJURDJEVIC, ANALYST, ANNEX RESEARCH

“Look at those numbers and you can see IBM is firing on all cylinders. They’ve exceeded all expectations.”

KEITH WIRTZ, PRESIDENT AND CHIEF INVESTMENT OFFICER, FIFTH THIRD ASSET MANAGEMENT

”IBM’s results in my view satisfied my expectations as a shareholder and as I look for the balance of the earnings reports this week, I think it’s going to set a pretty good tone.

“It was a solid report. They not only exceeded expectations on the top line, they exceeded expectations on the net ... Backlog on the services side was better than expected.”

JOSEPH FORESI, JANNEY CAPITAL MARKETS

“Probably the main takeaway is that bookings were ahead of expectations on the services side, and they raised full year guidance.”

AMIT DARYANANI, ANALYST, RBC CAPITAL MARKETS

”It’s a good quarter. They raised full-year guide. So from an execution basis, all the numbers look good. But what will move the stock near-term is that signings number.

”If you adjusted the currency, revenue is still growing at 5 percent year over year. That’s still impressive given how big and defensive IBM is.

“The big thing that has always tended to move the stock rightfully or wrongfully near-term has always been the services signing number, which they haven’t disclosed yet. That’s the number that everyone kind of focuses on.”

KIM CAUGHEY FORREST, SENIOR ANALYST, FORT PITT CAPITAL

I‘m a little confused as to why the shares are down because the margins were very strong and the revenue, especially in the second quarter when you expect softer revenue, makes it look like they did well in the quarter.

“Margins are the name of the game for this business. Through the years, they’ve divested themselves of the more commodity-like businesses and I think it shows they are managing their business and have picked correctly.”

RICHARD SICHEL, CHIEF INVESTMENT OFFICER, PHILADELPHIA TRUST

”They beat on earnings per share and they beat pretty well on their revenues versus expectations. They did raise their guidance by 10 cents so I would say, in general, it looks like a good report.

“If the stock is down, it is based on high expectations on the stock, which has performed well versus the market this year.”

Reporting by Liana Baker in New York and Alexei Oreskovic and Noel Randewich in San Francisco

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