IBM Stung by Currency Fluctuations

IBM had first-quarter sales that came in below Wall Street's estimate, despite hopes that the tech bellwether would herald a turnaround in tech stocks.
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IBM

(IBM) - Get Report

had first-quarter sales that came in below Wall Street's consensus estimate, despite hopes that the tech bellwether would herald a turnaround in the sector.

The Armonk, N.Y.-based firm's revenue was impacted by the strong U.S. dollar, although the company reiterated its previous earnings guidance for 2009.

IBM reported first-quarter revenue of $21.7 billion, down 11% from the same period last year, or 4% adjusted for currency. Analysts had estimated revenue of $22.51 billion.

The company grew its earnings by 4%, however, and beat analysts' forecast. IBM posted earnings of $1.70 a share on net income of $2.3 billion, compared to $1.64 and $2.32 billion in the year-ago quarter and above the estimate of $1.66.

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Shares of IBM slipped $2.61, or 2.5%, to $97.90 in after-market trading.

"IBM continued to perform well in a very difficult environment," said CEO Sam Palmisano, in a statement. The executive added that a shift from commodity businesses such as PCs into software and services have helped the firm withstand the worst of the recession.

The company still expects full-year earnings of at least $9.20 a share.

Despite its bullish outlook, IBM's total global services revenue slipped 10% compared to the prior year, or 2% adjusted for currency. Software sales fell 6% over the same period, or 2% taking into account currency fluctuations.

IBM is seen a great indicator for the overall health of the tech sector, although its software and services businesses have often helped it survive the vagaries of hardware spending.

Revenue from IBM's systems and technology division was $3.2 billion during the first quarter, down 23% on the prior year, or 18%, adjusted for currency.

The tech bellwether saw its one-time

acquisition target

Sun Microsystems

(JAVA)

snapped up

by

Oracle

(ORCL) - Get Report

Monday, and may now look elsewhere to bolster its x86 server and open source software strategies.

IBM executives will likely face questions about the firm's roadmap during a conference call to accompany the results late Monday. The company can either seek out M&A alternatives to Sun or opt to grow

organically

through R&D.

Like software rival

EMC

(EMC)

and virtualization provider

VMware

(VMW) - Get Report

, IBM's stock was seen as offering

potential upside

to embattled investors heading into the earnings season.