IBM Profit Up 17%, Beating Expectations

International Business Machines Corp. reported a better-than-expected 17% jump in second-quarter earnings on strong sales in its services business and a surge in computer revenue.

The world’s biggest computer maker said second-quarter profit from operations rose to $1.69 billion, or 91 cents a share, from $1.45 billion, or 75 cents, in the year-earlier period. IBM was expected to earn 88 cents, the average estimate of analysts from First Call Corp.

New server models, a rebound in personal computers and more stable pricing lifted computer sales. IBM, also the world’s No. 1 computer services company, added to that mushrooming business by signing $9.5 billion in contracts to manage other companies’ computer networks during the period.

Sales rose 16% to $21.91 billion, with strong growth worldwide. Sales of computer hardware surged 22%, services sales grew 15% and software sales were up 9%.

IBM’s computer business is recovering from the first half of last year, when PC revenue slumped after the company slashed prices.

Sustaining sales growth in the second half could be more difficult for IBM, analysts said. By the third quarter of last year, sales had begun rebounding from the PC price cuts, making comparisons tougher.

The latest earnings figures exclude a gain from the sale of its Global Network to AT&T; Corp. and charges related to reducing its presence in the memory-chip business.

Armonk, N.Y.-based IBM reported its results after the close of trading. Its shares closed down $1.63 at $134.63 on the New York Stock Exchange.

At a Glance

Other technology-related earnings, excluding one-time gains and charges unless noted:

* DoubleClick Inc.’s second-quarter loss widened to $5.1 million, or 13 cents a share, from $4.7 million, or 14 cents, a year ago, on higher expenses. Revenue more than doubled to $44 million from $17.3 million as demand rose for the Internet advertiser’s technology and services. The results were in line with estimates.

* E-Trade Group Inc. said it lost $24.2 million, or 10 cents a share, in the fiscal third quarter, compared with a profit of $5.1 million, or 3 cents, a year ago, as trading growth slowed and it spent more on technology and advertising to land and keep customers. Analysts expected a deeper loss of 12 cents a share at the Internet brokerage. Revenue climbed 128% to $151.7 million.

The company added 332,000 customer accounts in the quarter, up 37% from the previous quarter, for a total of 1.24 million.

* Hughes Electronics Corp. said it lost $97.6 million, or 23 cents a share, in the second quarter because of increased development costs and satellite-manufacturing delays. Hughes, the El Segundo-based unit of General Motors Corp., was expected to post a loss of 24 cents. Revenue jumped 30% to $1.78 billion, fueled by growth in its DirecTV subscription TV service.

* Qualcomm Inc.’s operating profit surged more than fivefold in its fiscal third quarter to $134.9 million, or 75 cents a share, from $24.7 million, or 17 cents, a year ago, on strong demand for cell phones and the chips that run them. The performance was well above analyst forecasts of 63 cents. Sales rose 15% to $1 billion.

*

MORE EARNINGS: C4