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IBM credits Q4 results to international growth

IBM credits Q4 results to international growth

Reports $US28.9 billion in revenue for the last quarter of the year

IBM Monday credited overseas growth and favourable currency-exchange rates for a preliminary fourth-quarter earnings report that was strong enough to help lift the stock market as a whole. But Samuel Palmisano, IBM's chairman, president and CEO, didn't say anything about the state of the U.S. IT market.

In its [announcement], IBM said that it would post US$28.9 billion in revenue for last year's fourth quarter, a 10% increase from the same period in 2006. The company said its fourth-quarter earnings would amount to $2.80 per share, up 24% year to year. Both the revenue and profit figures are above analyst expectations.

Forrester Research Inc. last month lowered its forecast growth in IT capital-equipment spending in the U.S. for 2008 to 4.8%, which is three percentage points below an earlier prediction that the consulting firm published in September. Forrester also lowered its growth forecast for spending on IT operations in the U.S., from 6.4% to 5.2%.

IBM, which plans to release the full details of its Q4 financial results in a webcast on Thursday, said that six percentage points of the revenue increase were due to currency gains. Beyond that, the company cited business growth outside of the U.S.

In fact, Palmisano didn't mention the U.S. at all in a short statement that accompanied the preliminary report. He said that the higher-than-expected results were driven by "the broad scope of IBM's global business -- led by strong operational performance in Asia, Europe and emerging countries."

IBM clearly has been growing and adding employees in Asia, especially in India. Last spring, the company said that about 53,000 of the 356,000 employees in its global workforce at the time were based in India.

Some analysts think that IBM is well on its way to becoming [one of the largest] IT services providers in India, if not the largest. That's despite the fact that vendors based in that country are themselves adding workers at an accelerating rate.

For instance, Bangalore, India-based Infosys Technologies Ltd., which last week became one of the first of the major outsourcing companies to report its results for the quarter that ended in December, said it added 11,683 employees to its payroll during that period, bringing its head count up to a total of 88,601.

One of the reasons emerging IT markets are so hot right now is investments by companies such as Airprint Networks Inc., a Waltham, Mass.-based a start-up that is developing applications to support printing from mobile devices.

Airprint has four full-time managers in the U.S. and uses about 15 developers in China via an outsourcing deal with DarwinSuzsoft, a Wakefield, Mass.-based offshore services provider. Mark Thirman, Airprint's CEO, said that he can employ four or five China-based developers for what it would cost him to pay one developer in the U.S.

The salary of a U.S.-based mobile applications developer can range from $90,000 to $140,000 at a junior level, Thirman said, adding that mobile developers "are the most expensive and the least available."

But what of the U.S. IT market? One of the many indicators rattling the stock market recently was the U.S. Department of Labor's latest job growth index, which showed that only a net total of 18,000 new jobs were created in the U.S. in November. The major reason for the weak showing was a decline of about 75,000 jobs in the goods-producing sector, a category that typically doesn't include large numbers of IT workers.

In comparison, the Labor Department's professional and business services category, which is more likely to include tech jobs, increased by about 93,000 jobs in November.

That is a clear indication that jobs requiring "a significant amount of education and training are where we are experiencing growth," said Scott Watkins, a consultant at Anderson Economic Group LLC in East Lansing, Mich.

Still, "when it comes to hiring, it's not the numbers, it's the mood -- and there's a recessionary mood," said David Foote, CEO of consulting and market research firm Foote Partners LLC in Vero Beach, Fla.

In a survey of 575 CIOs conducted by Foote Partners last August, 89% said they had plans to either increase their IT head counts or at least keep them the same, while the other 11% said they planned to make reductions. Foote said he thinks that if he conducted the same survey Monday, the optimism reflected in the earlier results would be dampened some -- but not by much.

IT workers are a lot better off than they were during the dot-com bust, according to Foote. At that time, the Web wasn't as mature as it is now, and companies were more willing to cut back on some of their Web-based business efforts, he said. That's not the case anymore. "Companies can't go backward," Foote said. "Even if they lose sales, they have to continue to improve those Web-enabled businesses."

There are caveats attached to Foote's assessment. For instance, he said that IT workers who are in a career transition could get caught up in cost-cutting efforts.

More generally, IT recruiters say that the tech workers who are in the best position for survival in their jobs are those who work directly with customers, are business-savvy and have specialized skills, such as SAP or industry-specific experience.

"It's still a pretty good market," said Jack Harrington, an IT staffing consultant at Atlantic Associates Inc. in Boston. He hasn't seen the gloomy IT growth forecast headlines turning into bad news for tech pros yet, and he said workers' future job prospects will be helped by retiring baby boomers as well as a decline in the number of college graduates with IT skills.


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