Jan. 17 (Bloomberg) -- International Business Machines Corp., the biggest computer-services company, forecast 2008 profit that beat analysts' estimates, as growth in Europe and Asia outpaces U.S. sales. The shares rose 4.9 percent.

Earnings will climb to between $8.20 and $8.30 a share, Armonk, New York-based IBM said today after releasing its fourth-quarter results. Analysts in a Bloomberg survey had estimated $7.90.

Chief Executive Officer Samuel Palmisano is buying software companies and hiring workers outside the U.S. to boost revenue at IBM's most profitable units. The company said it's ``on track'' to meet a 16 percent annual growth goal, reaching earnings of $10 to $11 a share by 2010.

``IBM has done an amazing job of transforming their business over the last five years to get out of low-profit, low- growth areas,'' said Andy Miedler, an analyst at Edward Jones & Co. in St. Louis. Miedler recommends buying IBM stock and doesn't own any.

Fourth-quarter net income climbed 12 percent to $3.95 billion, or $2.80 a share, from $3.54 billion, or $2.26 a share, a year earlier, IBM said today in a statement. Sales rose 10 percent to $28.9 billion, helped by stronger currencies overseas. The results echoed a preliminary report from earlier this week.

Good Start

The fourth quarter was ``the strongest revenue and profit performance in almost a decade,'' Chief Financial Officer Mark Loughridge said on a conference call. ``It was a great close to '07, but an even better start to '08.''

IBM rose $5 to $106.10 in late trading after closing at $101.10 on the New York Stock Exchange. The shares climbed 11 percent last year.

IBM is increasing staff in Brazil, Russia, India and China, where sales jumped 39 percent in the first three quarters of 2007. The company employed about 73,000 workers in India as of December, 38 percent more than a year earlier.

The company won a five-year contract last month with Vodafone Group Plc, the world's biggest mobile-phone company, to manage data centers in India.

Europe, Asia

Sales in Europe, the Middle East and Africa rose 16 percent last quarter to $10.8 billion and revenue in the Asia-Pacific region climbed 15 percent to $5.5 billion, fueled by contracts for services and software.

That helped offset slower growth in the Americas, where revenue rose 5 percent to $11.7 billion. Financial-services companies, suffering from subprime mortgage losses, are cutting technology budgets. Last month, Forrester Research Inc. lowered its estimate for U.S. technology spending growth in 2008 to 5.2 percent, from 6.4 percent.

IBM's software sales rebounded from a weaker-than-expected third quarter, rising 12 percent to $6.26 billion. The company is using acquisitions to expand the software unit, its most profitable. IBM announced the purchase of seven software companies last year, including Ottawa-based Cognos Inc. in November. At $4.9 billion, it was the company's largest deal ever.

Cognos, which sells programs that help companies analyze business data such as budgets and inventory, said yesterday that the Ontario Superior Court of Justice approved the deal.

IBM's services sales, which account for more than half of revenue, increased 17 percent, to $14.9 billion. David Grossman, an analyst at Thomas Weisel Partners LLC, had forecast sales of $14.2 billion.

Hardware Business

Hardware revenue dropped by 3.9 percent to $6.8 billion, as the sale of a printing division in June reduced sales. The company is counting on its Power6 processor and servers, introduced in May, to bolster the unit.

``Hardware was weaker, as expected, but the margins were better,'' said Shaw Wu, an analyst at American Technology Research in San Francisco. He advises buying IBM shares.

The hardware business's gross margin, the percentage of sales left over after deducting production costs, was 46 percent last quarter, up from 42 percent a year earlier.

Of the 10 percent total revenue increase, 6 points came from currency benefits. The euro climbed 11 percent against the U.S. dollar last year, boosting the value of sales made in Europe.

The preview of results earlier this week was IBM's first preliminary earnings announcement since 2005, according to spokesman Ian Colley. That report spurred the stock's biggest jump in more than five years.

To contact the reporter on this story: Matthew R. Miller in Atlanta at mmiller31@bloomberg.net

Last Updated: January 17, 2008 17:41 EST