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Powered by India, IBM beats Wall St

IBM's fourth-quarter profit goes up by 11% & beats Wall Street expectations, reports Prerna K Mishra.
None | By Prerna K Mishra, New Delhi
UPDATED ON JAN 20, 2007 04:56 AM IST

The Big Blue may like to keep it under wraps but its blockbuster performance in services contracts cannot hide the real thing. International Business Machines (IBM) reported a thumping performance in the fourth quarter of 2006 on Thursday, and news on new deals it is signing has a close India connection.

The company’s current headcount in India, which happens to be its largest base of IBM-ers outside the US, is already around 50,000 - an increase of over 100 per cent in past two years. And industry estimates expect that figure to double by 2010 to one lakh.

IBM showed signs that there was a huge demand to feed that kind of recruitment as it informed Wall Street that it signed $17.8 billion in services contracts in the latest quarter - a hefty leap from $10.5 billion in the previous quarter and $11.5 billion a year ago.

Associated Press reported that in the fourth quarter alone, IBM's services division posted revenue of $12.8 billion - up 6 per cent from the previous year. Without currency fluctuations, however, the rise would have been 3 per cent.

IBM's fourth-quarter profit rose 11 per cent and beat Wall Street expectations on Thursday. In the last three months of 2006, IBM earned $3.54 billion on revenue of $26.3 billion. 

The new service deals showed signs of strong future revenue. Services now account for more than 50 per cent of the revenues of IBM, which is better known in the world for the computers it makes.

Other telltale signs about India’s role in IBM’s global services delivery model abound. During his visit to India in June last year, IBM Chairman and Chief Executive Officer Samuel J Palmisano committed to triple the investments in India to $6 billion over the next three years.

On India hiring, IBM does not disclose its detailed plan, but it has shared some figures with analysts that do tell a tale.

In its latest report, AMR Research has projected that IBM-India expects to have 1,00,000 employees by the end of 2010.

The company, which significantly held its analysts’ meeting in Bangalore in June last year, has made public the fact that it has been adding an average of 1,000 people a month in India for the past few quarters. And interestingly, nearly 70 per cent of IBM-India employees have been with the company for less than three years, according to analysts.

The expansion continues. Recently, IBM expanded its global delivery capacity by opening its fourth facility in DLF IT Park at Rajarhat in Kolkata where it plans to hire more than 3,000 employees. “The new facility will help IBM scale up existing application services delivery capabilities in line with the growing needs,” the company said.

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