SAN FRANCISCO - IBM's ( IBM) steadfast loyalty to its earnings projections may look too optimistic in light of the bruising companies are expected to take over the coming year.

The company said on Oct. 16 it is confident of delivering full-year EPS of at least $8.75 a share, implying fourth-quarter earnings of $3.07, or 9.6% growth year over year, in line with analysts' estimates, according to Thomson Reuters.

IBM also held fast to its long-term earnings roadmap, which sets an end-point EPS goal of $10 to $11 in 2010. The company has not yet projected 2009 earnings. Yet Gartner has cut its 2009 worldwide IT spending growth projection by more than half, to 2.3%, with the U.S. market most affected by frozen budgets.

Analysts now expect 2009 earnings of $9.24 a share, down from $9.34 in early October and $9.59 in July. The consensus estimate predicts earnings growth of 5.6%, or 49 cents, above IBM's projection for 2008 earnings of $8.75.

IBM's 2009 sales determine the company's longer-term earnings performance, as revenue is recognized over time. CFO Mark Loughridge said on the conference call that he is confident IBM can stick to its 2010 EPS target of $10 "on operational performance and maybe even exceed that."

By cutting expenses over the past two years, particularly in developed markets, IBM has delivered margin improvements that will see it through a tough economy.

Another driver is annuity-based revenue. As IBM signs multi-year contracts that create a regular revenue stream, it is upholding pricing levels that grow margins, Loughridge said. Discounting would undercut margins.

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