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IBM Q2 Net Up on Strong Software Revenue and Costs Cut

IBM has reported higher second quarter net income and strong growth in its software business after it cut jobs. Net income for the quarter was up 11 percent to USD 2.o2 billion, or USD 1.30 a share, from USD 1.83, or USD 1.12 per share, a year earlier.

"Our performance was led by our software business, which generated USD 4.2 billion of revenue this quarter with strong margins, and is a significant part of our integrated portfolio," said Samuel Palmisano, IBM chairman and chief executive officer.

Second quarter revenue fell 2 percent to USD 21.9 billion from USD 22.3 billion, which included USD 557 million from the PC business that IBM sold to Lenovo Group Ltd. in May 2005. Excluding the divested PC business, revenue rose 1 percent, IBM said.

Wall Street analysts, on average, had forecast earnings before exceptional items of USD 1.29 per share and revenue of USD 21.9 billion, according to Reuters Estimates.

IBM also said its 2006 earnings per share would be consistent with Wall Street forecasts.

IBM earnings have got a big boost after it cut expenses by slashing about 16,000 jobs and focused on smaller, higher-profit services and consulting contracts, a business that accounts for about half of revenue.

The USD 1.8 billion in savings from the job cuts will be invested in other parts of its business such as software, IBM said. IBM’s software unit produced strong revenue in the second quarter, rising to USD 4.24 billion.

The company’s share, which closed at USD 74.26 on the New York Stock Exchange, rose 1.6 percent to USD 75.42 after the earnings were announced in late trading on the Inet brokerage network. Shares of the company have fallen about 11 percent this year.


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