IBM 2Q profit jumps 22 percent, beats forecast

The Armonk, N.Y.-based company also raised its profit outlook for 2008, saying it expects to earn at least $8.75 per share on the year, an improvement of 25 cents per share over IBM's previous guidance.

The large jump reflects IBM's optimism that it will continue to benefit from its broad international penetration and highly profitable blend of services, software and hardware.

More than half of IBM's business comes from selling services to companies looking to cut costs or better manage their information technology infrastructure. That business has held up remarkably well for IBM despite fears that the economic downturn in the U.S. has started to pinch off corporate spending in other parts of the world.

IBM said Thursday it earned $2.77 billion, or $1.98 per share, in the three-month period ended June 30. That's 16 cents per share higher than the average estimate of analysts polled by Thomson Financial.

Last year IBM earned $2.26 billion, or $1.55 per share, for the same period.

Sales for the period jumped nearly 13 percent to $26.8 billion, about $900 million more than analysts were expecting. That revenue rise would have been just 6 percent, however, if not for weakness in the dollar. Deals IBM does in other currencies translate into more dollars as the U.S. currency falls.

Investors have been betting that IBM would continue to be a bright spot in an otherwise dreary economic picture. IBM shares are up from under $100 per share in January to over $125 per share today.

The stock rose 58 cents per share, or a fraction of a percentage point, to $126.52 during the regular trading session. The stock fluctuated in after-hours trading, falling 72 cents to $125.80.

Many analysts were expecting IBM to handily beat Wall Street's tepid targets, so the scale of the upside surprise helped juice the stock price initially. But the enthusiasm was dampened by concerns that worsening economic conditions could still harm the company.