IBM Earnings, Apple IPad Sales Point to Spending Boom

International Business Machines Corp., the world’s largest computer-services provider, and Apple Inc., maker of the iPhone and iPad, reported earnings that beat analysts’ estimates, adding to evidence of a rebound in corporate spending on technology.

IBM reported fourth-quarter profit and revenue yesterday that topped analysts’ predictions, buoyed by demand for computer systems and software. Apple said more than 80 of the world’s top 100 companies are using the iPad tablet computer, contributing to the company’s record quarterly sales.

Businesses are spending more on products ranging from IBM mainframes to smartphones and tablet computers. That bodes well for results due in coming weeks from Hewlett-Packard Co., Microsoft Corp., Dell Inc. and other companies that supply corporations with computers, services and software. Last week, Intel Corp., the biggest chipmaker, forecast sales that may top estimates as companies upgrade computer and server fleets.

“As companies have gotten through a couple of years of underinvestment, they really need to refresh their infrastructure,” said Abhey Lamba, an analyst at ISI Group in New York. “The December quarter was really great for servers.”

After slashing spending in the wake of the worst U.S. economic recession since the 1930s, corporations are now updating their aging hardware.

Reports last week on retail sales and industrial production supported prospects for quickening growth that may boost demand for products as varied as cars from Ford Motor Co. cars and computer products made by Apple and IBM.

‘Employee Demand’

Per-share profit rose to $4.18, Armonk, New York-based IBM said yesterday, topping the $4.08 average estimate of analysts surveyed by Bloomberg. Sales climbed 6.6 percent to $29 billion as hardware revenue got a boost from IBM’s newest mainframe and as companies bought more analytics software. Analysts estimated sales of $28.3 billion on average.

Apple said sales increased 71 percent to $26.7 billion, exceeding the $24.4 billion predicted by analysts in a Bloomberg survey. The company sold 7.33 million iPad tablet computers in the first holiday season for the device, Apple said yesterday. That topped the 6 million projected by Mike Abramsky at RBC Capital Markets LLC.

“Employee demand for iPad in the corporate environment continues to be significant,” Apple Chief Financial Officer Peter Oppenheimer said yesterday. “Enterprise CIOs are adding iPads to their approved device list at an amazing rate.”

Testing IPads

JPMorgan Chase & Co., Cardinal Health Inc. and Wells Fargo & Co. are among companies now testing or using the device, he said.

“I don’t think anyone thought they could sell 7 million iPads,” said Jane Snorek, who helps oversee about $75 billion at Nuveen Asset Management and said Apple is Nuveen’s biggest holding. “I don’t think anyone thought they could even make 7 million iPads.”

Companies are using the iPad for product demonstrations, approving shipping orders and calling up finance options to help sell products ranging from cars to loans, customers such as Wells Fargo, SAP AG and Tellabs Inc. said after its introduction last year.

Apple, based in Cupertino, California, fell $1.81 to $338.84 at 4 p.m. New York time in Nasdaq Stock Market trading. The company is the world’s second-most valuable company behind Exxon Mobil Corp.

IBM added $5.04, or 3.4 percent, to $155.69 on the New York Stock Exchange, setting a record for a third straight day.

Microsoft’s Results

Microsoft, scheduled to announce quarterly earnings on Jan. 27, may report sales rose 1 percent as corporate demand for Office and server software makes up for weaker-than-expected personal-computer sales to consumers. Sales will be $19.1 billion, the average estimate of analysts surveyed by Bloomberg.

That trade-off was evident in Intel’s earnings. The Santa Clara, California-based company said demand for chips used in so-called cloud-computing centers, which provide network services over the Internet, bolstered fourth-quarter sales and profit even as consumer demand for notebooks remained sluggish.

IBM said fourth-quarter hardware revenue climbed 21 percent to $6.3 billion, as a mainframe computer introduced in July helped boost sales in that product category by almost 70 percent. Sales from the software division gained 7 percent to $7 billion. Signings for services rose 18 percent to $22.1 billion, the first increase in a year.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net.

To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net.

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