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Tuesday, Jul. 21, 1998
IBM posts flat earnings amid falloff in PC sales
Firm's growing global services unit rated a plus
Associated Press
NEW YORK - International Business Machines Corp. on Monday reported flat second-quarter profits amid slower sales of personal computers, price wars in computer chips and reduced consumer demand due to the Asia economic slump.
The results slightly beat Wall Street forecasts. But the drop in hardware and other sales at IBM as well as the strong dollar offset gains in software and in the company's fast-growing global services unit, which helps big businesses set up and run their computer systems and networks.
Despite strength in some areas, IBM chief executive Louis V. Gerstner acknowledged the second-quarter results were mixed. The performance demonstrated IBM's growing reliance on its sales of computer services to large corporations to help buoy results from its disparate businesses.
``They're relying on that aspect of the business even more now given the fact the other part of the business is slowing down,'' said Moshe Katri, an analyst who follows the services business for Warburg Dillon Read.
IBM said it earned $1.45 billion in the quarter, roughly even with last year's second quarter. But profits rose slightly per share, on a diluted basis, to $1.50 from $1.43.
Analysts had expected IBM to earn $1.49 a share, according to First Call.
IBM's overall revenues edged slightly lower, to $18.82 billion from $18.87 billion, dragged down by a 12.7 percent drop in overall hardware sales.
IBM mostly cited slow sales of personal computers for the hardware decline as the company struggled to sell already built machines. IBM and several other major PC makers, after overestimating demand from customers, have been forced to aggressively cut prices to try to unload bloated inventories.
In addition, the company's sales of its System 390 mainframes were hurt as customers put off purchases to wait for a new, more powerful IBM model due out next month.
The company also said prices of memory chips remained low as price-cutting wars continued, eating into its revenues.
The company was hurt by the strong dollar during the quarter, which reduced the value of IBM's overseas profits when translated back into dollars. IBM reported revenues grew 5 percent from North America and 2 percent from Europe, but fell 13 percent in Asia and 8 percent in Latin America.
Conversely, revenues from services rose 22 percent to $5.6 billion and from software rose 5 percent to $3.2 billion, aided by strong sales of database and operating system software.
The company also kept a lid on costs. IBM boosted its workforce by 7,500 to 277,000 in the first half of 1998, after adding 10,500 workers to its services unit but subtracting 3,000 from other businesses.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web