Software and services drive IBM profits

IBM reported fourth-quarter earnings below analysts' expectations, nevertheless still beat forecast profits because of strong margins in its software and services businesses.

Revenues were $29.5bn for the quarter, up 1.6 per cent from the same quarter last year, nevertheless missing Wall Street's anticipated $29.73.

The research industry

As traditional hardware sectors suffer across the research industry, IBM is relying more on higher-margin businesses in software and services.

Pre-tax income from IBM's hardware business was down 33 per cent. Its global financing segment saw pre-tax income decrease 9 per cent.

Instead, the company's software and services businesses drove overall profits. Software pre-tax income rose 12 per cent, to $3.7bn, during services pre-tax income rose 18 per cent for the quarter, to $1.9bn.

However, analysts questioned whether the good margins in the services business were due to labour migrations outside the US.

The 2010 road map

"We were very specific in our overall business model for the 2010 road map and 2015, of our intention to pull spend and drive productivity as a global corporation," Mr Loughridge responded. "Services businesses are a big beneficiary of that large structural corporate take-out."

Mr Loughridge said IBM will continue to expand its business model by investing in its new, growing business segments in cloud computing, business analytics and "smarter planet" software, which makes cars and appliances run more efficiently.