IBM hikes full-year outlook

By Ritsuko Ando

NEW YORK (Reuters) - IBM (IBM.N) surprised markets by sharply raising its full-year earnings forecast as its growing software and services businesses boosted profit margins, lifting its shares in after-hours trade.

Stock in the world's largest technology services firm rose as much as 3 percent, building on gains of more than 3 percent in the regular session, as the company's outlook and higher-than-expected quarterly earnings gave investors hope that the worst of the technology downturn may be over.

Kim Caughey, senior analyst at Fort Pitt Capital Group, was impressed by the outlook and earnings despite the lower revenue.

"This, combined with Intel's results, is pushing me to be more optimistic. Seeing they made it on the bottom line, and were pretty darned close on the top line, it gives me confidence looking at technology in general."

International Business Machines Corp said it now expects 2009 earnings of at least $9.70 per share, up from its previous outlook of $9.20.

The upbeat results added to the market's optimism following leading chipmaker Intel's (INTC.O) stronger-than-expected earnings and outlook announcement this week.

Analysts said IBM's higher outlook took the disappointment out of its lower-than-expected second-quarter revenue, which fell 13 percent to $23.3 billion (14.2 billion pounds). The market's average forecast had been for $23.5 billion, according to Reuters Estimates.

Net profit for the quarter rose to $3.1 billion from $2.8 billion in the year-ago quarter. Profit per share rose to $2.32 from $1.97, much higher than the average Wall Street forecast of $2.01 per share, according to Reuters Estimates.