Feb. 26 (Bloomberg) -- International Business Machines Corp., the world's biggest computer-services company, will buy back $15 billion of stock. IBM rose to a four-month high in New York trading and U.S. stocks rallied, erasing earlier declines.

The repurchase, which adds to about $400 million remaining under a previous plan, may lift earnings by 5 cents a share this year, IBM said today. The company will earn at least $8.25 a share, up from a previous forecast of at least $8.20.

Chief Executive Officer Samuel Palmisano gave two upbeat forecasts last month as overseas markets and acquisitions fueled growth amid a slowdown in the U.S. The company, which devoted $18.8 billion to repurchasing shares in 2007, said it expects to spend as much as $12 billion on stock this year.

``This really shows that they're still focusing on the shareholder, which is what you want,'' said Kim Caughey, senior equity analyst at Fort Pitt Capital Management, which oversees $1.2 billion in assets, including IBM shares. ``It implies they're going to have some serious cash generation.''

IBM, based in Armonk, New York, rose $4.30, or 3.9 percent, to $114.38 at 4 p.m. in New York Stock Exchange composite trading, the highest since Oct. 31. The Dow Jones Industrial Average advanced 114.70 points to 12,684.92, while the Standard & Poor's 500 Index added 9.50 points to 1,381.30.

$94 Billion

IBM, which has spent $94 billion buying back 1.4 billion shares since 1995, will use cash from operations for the repurchase. The company generated free cash flow of $12.4 billion last year, a gain of $1.9 billion from a year earlier.

In May, IBM said it spent $12.5 billion buying back 118.8 million shares, or 8 percent of its outstanding stock, in an accelerated share repurchase.

``This represents a further return to shareholders,'' Jesse Greene, IBM's vice president for financial management, said in a telephone interview. ``It represents the strong financial position and strong operating performance of the company.''

IBM stock had gained 1.8 percent this year before today, outperforming shares of competitors such as Electronic Data Systems Corp., Accenture Ltd., Hewlett-Packard Co. and Dell Inc. Electronic Data, the second-biggest computer-services provider, slumped the most in more than four years on Feb. 7 after first- quarter forecasts missed analysts' predictions.

Gaining Share

Last month, IBM reported that fourth-quarter net income climbed 12 percent to $3.95 billion, or $2.80 a share, beating the average estimate of analysts in a Bloomberg survey. Sales rose 10 percent to $28.9 billion.

Palmisano, 56, sold the company's less profitable personal- computer and printing businesses to focus on software and services sales. He aims to boost IBM's earnings by as much as 16 percent a year, to between $10 and $11 a share by 2010.

Since 2001, IBM has spent more than $15 billion buying software companies, including the $4.9 billion acquisition last month of Cognos Inc., to add to its most profitable unit.

``IBM's management, in a very challenging environment over the last several years, has moved the company into the sweet spot of the software and services business,'' Michael Holland, chairman of Holland & Co., said in a telephone interview. The New York-based firm oversees more than $4 billion, including IBM shares.

Overseas Growth

The company also is focusing on emerging markets to bolster growth. Sales in Europe, the Middle East and Africa rose 16 percent last quarter, while Asia climbed 15 percent, IBM said. In December, the company announced it will spend an additional $1.6 billion on sales in marketing in China, India and other developing countries through 2010.

In India, domestic revenue approached $1 billion for the first time in 2007. The company employed about 73,000 workers there at the end of last year, 38 percent more than in 2006.

IBM's earnings forecast for 2008 also beat the average estimate of analysts in a Bloomberg survey. They now expect net profit to rise 9 percent to $11.4 billion this year, based on sales of $104.6 billion, a 5.9 percent increase over last year.

That contrasted with predictions from market researchers such as Forrester Research Inc., which estimates that U.S. corporate technology spending growth will slow to 2.8 percent this year, compared with 6.2 percent in 2007.

``IBM is a very conservative company,'' said Fort Pitt's Caughey. ``For management to raise guidance is a serious thing.''

To contact the reporter on this story: Cesca Antonelli in Washington at fantonelli@bloomberg.net

Last Updated: February 26, 2008 16:05 EST