Technology bellwether IBM (IBM – Free Analyst Report) earned $2.82 a share in the September quarter, up 18% from $2.40 in the comparable period of 2009 and a bit above our estimate of $2.75. Revenues rose 4% adjusted for currency, with the Americas and Europe/Middle East/Africa regions up only slightly, and the BRIC nations (Brazil, Russia, India, China) advancing 26%. Adjusted services revenues increased 2% and margins expanded nearly a percentage point. Services signings declined 7%, but would have risen 14% including a contract signed shortly after the quarter closed. Software revenues and pretax profits both rose 2%. But the computer hardware division delivered the best performance, with revenues advancing 11%, aided by the delivery of new system z mainframe servers in the quarter, and hardware profits rose nicely. Stock repurchases accounted for about $0.14 of the year-to-year improvement in earnings per share and a lower tax rate added about a dime.

The company has raised its earnings forecast for 2010, from $11.25 a share to at least $11.40, which implies earnings of $4.00 a share in the final period of the year, including about a nickel boost from a lower tax rate. The December quarter is also a seasonally strong period for computer hardware sales. We expect further strength in emerging markets and the new server product to support results of about $12.60 a share in 2011, up $0.20 from our previous estimate. And we still look for earnings to approach the company's long-term target of $20.00 a share by 2015.

The stock pulled back following the good earnings report, possibly due to the lower services signings. But it remains a solid selection for total return potential to the 2013-2015 time frame.

About The Company: International Business Machines is a worldwide supplier of advanced information processing technology, communication systems, services, and program products. 2009 revenues can be broken down as follows: Global Technology Services, 39%; Global Business Services, 19%; Systems and Technology, 17%; Software, 22%; Global Financing, 2%; Other, 1%. Foreign business accounted for 64% of 2009 revenues.

* This report includes late-breaking news not reflected in our full-page review of this company.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.