AFI BLOG: Media and Technology

IBM Sales, Profit Give Tech a Healthier Look - The Wall Street Journal

Surprising Strength Fuels Market Rally; SAP Also Is Upbeat

International Business Machines Corp. surprised investors by preannouncing stronger-than-expected sales and earnings in the fourth quarter, leading to speculation that the U.S. economic slowdown may not be hurting technology companies as much as expected.

The battered stock market rallied and was further supported by an upbeat revenue announcement from German business-software giant SAP AG. Both companies sell to big business and governments world-wide and are seen as gauges of capital spending.

For investors, IBM’s announcement “was a welcome surprise,” said Chris Whitmore, who follows IBM for Deutsche Bank. But he cautioned: “We still have reservations about 2008. IBM’s results don’t change the forward outlook.” He said he anticipates world-wide information-technology spending this year will rise only 3% compared with a 6% to 7% increase last year.

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