IBM meets expectations, net income up 15 percent

Amidst a dreary earnings season, IBM Corp. stood out by meeting analyst estimates in posting earnings per share of US$0.98, the consensus figure of analysts polled by First Call/ Thomson Financial. The company also put to rest fears that it would trim its outlook in response to the widespread industry slowdown: Chief Financial Officer (CFO) John Joyce said in a conference call with analysts that the company expects to meet earnings estimates for 2001.

The company announced Wednesday that net income for the first quarter of 2001 was $1.75 billion, a 15 percent increase over the year-earlier period. First-quarter revenue totalled $21 billion, a 9 percent increase from a year ago.

IBM said its services revenue grew 21 percent over last year’s first quarter, while its microelectronics OEM (original equipment manufacturer) revenue increased 117 percent and its WebSphere management software revenue climbed 53 percent.

IBM’s Global Services group accounted for 40 percent of revenue, and Joyce said services would continue to drive IBM’s growth. He took aim at analysts who view IBM as a mainframes-and-PCs firm; maintaining that the company is now concentrating on e-business and helping clients integrate products and protocols from an array of vendors.

Globally, the company’s revenue was up 18 percent in Asia, 11 percent in Europe, and 7 percent in the Americas. “Our results in Japan continue to underscore the point that IT spending, and most notably services, can be a priority in a weak economy,” Joyce said. He added that the company has not seen a slowdown in European demand for e-business applications — a region in which other companies have lately been running into trouble.

“We recognize that the U.S. market remains volatile and uncertain, and it is likely that other regions of this global market are feeling some of the same pressures. We’re certainly not immune to a major worldwide economic downturn,” Joyce said.

In a statement accompanying the earnings release, IBM Chairman and Chief Executive Officer Lou Gerstner attributed the strong results to IBM’s identity as a “diversified, services-led company.” He said that while many in the industry have been “a bit carried away” by Internet mania, IBM remained focused on building its strength as a services company and on developing new products and technologies.

But not all of IBM’s news was good. One glaring red mark on the balance sheet: IBM’s recently created Personal and Printing Systems unit posted a $58 million loss for the quarter. The unit was formed in February to boost the company’s PC division by consolidating its PC, Retail Store Solutions, and Printing Systems groups.

Gerstner said the weak desktop market goes beyond temporary or cyclical issues; he termed the sector a “mature business … (that) no longer drives the economics of the IT industry.” He said the ailing PC market also impacted IBM’s “weak” disk drive and display businesses.

IBM’s (IBM) share price surged in anticipation of its earnings announcement, made after the market closed. The company ended trading Wednesday on the New York Stock Exchange at $106.50, up 6.8 percent.

IBM, in Armonk, New York, can be reached at +1-914-499-1900 or on the Internet at