IBM, Intel Boast Strong Earnings for 3rd Quarter

Oct 17, 05:00 AM

Current Headlines: By Michelle Kessler and Jon Swartz

SAN FRANCISCO -- IBM and Intel, two of the world's largest technology companies, reported strong third-quarter earnings Tuesday.

IBM posted its third-consecutive impressive quarter, due to its services business. Earnings rose to $2.4 billion, or $1.68 a share, from $2.2 billion, or $1.45 a share, a year ago. Revenue improved 7%, to $24.1 billion -- in line with analysts' expectations.

Although IBM rarely posts dramatic, Google-like results, "They have really continued to deliver through what's been a pretty tough time for the tech market," says analyst Charles King at Pund-IT. "It's a testimony to the company's products."

No.1 chipmaker Intel said earnings soared 43% to $1.9 billion, or 31 cents a share, from $1.3 billion, or 22 cents a share, a year ago. Revenue jumped 15%, to $10.1 billion, surpassing expectations.

Also Tuesday, Intel named Stacy Smith, assistant chief financial officer, as its new CFO. Smith replaces Andy Bryant, who becomes chief administrative officer; Smith will report to Bryant. Intel also said it will cut 2,000 jobs in the current quarter, reducing employment to about 86,000.

Investors use both companies' results to gauge the strength of worldwide tech spending. IBM is a good indicator of corporate spending on technology, because most of its customers are big businesses. Intel is a barometer of computer sales because its chips are found in about 80% of PCs.

IBM has quietly been streamlining by shedding unprofitable or troubled businesses. The computer-services giant sold its hard-disk drive division to Hitachi in 2002, its PC division to Lenovo in 2005 and its printer services division to Ricoh this year. "The company has made it very clear that they're not in the commodity product space," King says.

It's unclear how much more IBM can grow. Since it already dominates large corporate IT contracts, CEO Sam Palmisano has made small business a priority. "I think that took some people by surprise, since IBM is not really known as a small-business vendor, King says. "But they could really get a toe into this market."

Intel has been taking market share from Advanced Micro Devices in recent quarters. Longtime underdog AMD gained on Intel in recent years, but the giant is fighting back with an "aggressive road map (that) continues to pressure AMD," equity analyst Doug Freedman at American Technology Research said in a recent research note. (c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.