Technology bellwether IBM's (NYSE:IBM) second-quarter results, reported on Thursday after the market close, demonstrate that the company is feeling few ill effects from a sickly global environment. And despite a big recent run up in the stock, there is still room for more shareholder returns.

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Revenue Results
IBM's third-quarter net revenue fell 7% to $23.6 billion, but fell only 5% when stripping out the impact of currency fluctuations on international sales. In terms of reported results (or including currency impacts) the largest declines came from global financing (down 15.4%), systems and technology (down 11.6%), and global business services (down 11.5%). The rest of the major operating units, including global technology services and software, posted low single-digit top-line declines.

Impressive Sector Growth
Despite the continued sales struggles, total company operating income grew 12.3% to $4.4 billion to account for an impressive 18.6% of sales. Global technology services, which provides IT outsourcing, maintenance and related services to companies, continued its impressive ways as operating income grew 23.8% to account for 40% of total consolidated sales. Rivals include Accenture (NYSE:ACN), which posted an operating margin of 12.5% during its most recent fiscal year. Infosys (Nasdaq:INFY) and Cognizant (Nasdaq:CTSH) also compete in the space and posted operating margins of 30.5% and 19.1%, respectively.

Beating the Analysts
Despite the mixed profit picture, IBM's diversified business model both in terms of geography and product mix continues to pay dividends in a very difficult global economic environment. It is also a model that others are looking to copy, as witnessed by the recently announced acquisitions of Perot Systems (NYSE:PER) and Affiliated Computer Services (NYSE:ACS). IBM's second quarter earnings growth was no exception, rising 13.8% to $3.2 billion, or $2.40 per diluted share. This came in ahead of analyst projections.

Bottom Line
The software segment has been a major focus for IBM as of late. It expects the software operating profit margin to continue to improve. As a result of strong software trends and growing profitability in the other units, IBM raised its full-year earnings guidance again, this time to "at least" $9.85 per share (up from $9.70) and also boasted it is "well ahead of pace for our 2010 roadmap of $10 to $11 per share." (Explore the controversies surrounding companies commenting on their forward-looking expectations in Can Earnings Guidance Accurately Predict The Future?)

At a current share price of just over $120, IBM is trading at 12.4 times this year's earnings expectations and under 12 times the mid-point of current 2010 guidance. Free cash flow trends are also coming in strong and will only improve further as world growth prospects gain momentum.

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