IBM predicted to raise financial forecast

IBM is expected to tell the world and its dog that it is doing much better than it expected.

The word on Wall Street is that Biggish Blue will be buoyed by strong software demand and will repeat last year’s first-quarter performance, when the company raised its full year forecast.

It has been a good time for software sales, with Oracle’s software having a strong first-quarter too. Outsourcing firm Accenture also did a bit better than expected.

The expectation is that IBM may raise its full year outlook. Sterne Agee analyst Shaw Wu told Reuters that there was a “fair likelihood” IBM would blush a bit and “modestly raise” its outlook.

Software is IBM’s most important division and includes everything from data analytics to management software.

IBM’s software business made more than 44 percent of its pre-tax profit last year and the company has said it will make up half of its profit by 2015.

IBM is expected to claim sales of $24.8 billion this time which is not to be sneezed at.

Wu thinks that IBM’s cunning plan of merging IT with software and services “has given it strategic and structural advantages.”

Of course the company’s bottom line depends on how the rest of the company functions. IBM’s services business, its second largest business, is expected to be stable. Its rival Accenture had a strong quarter too.

IBM’s services unit, which incorporates PriceWaterhouseCoopers consulting, made 42 percent of the company’s pre-tax profit in 2011.

The downside on the books is expected to be IBM’s mainframe business which is expected to continue to show declining revenue in the first half of 2012.

This might not be the case in the future as the rising demand for storage and cloud based systems should start to pick up soon and make the mainframe business less of a lemon.

Stifel Nicolaus’ David Grossman told Reuters that IBM may even be taking server business away from HP and Oracle.