May 7, 1999
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Analyst Sees a Strong Start
For IBM's Hardware Business
Dow Jones Newswires
NEW YORK -- International Business Machines Corp.'s hardware business, which saw suprisingly strong growth in the first quarter, is off to a strong start in the second quarter, SoundView Technology Group analyst Gary Helmig said Friday.
In trading on the New York Stock Exchange Friday, IBM's shares climbed $5.8125 to $215.0625.
Company Profile: International Business Machines Corp.
Mr. Helmig, who rates IBM's stock a "buy," said mainframe computer sales are "exceptionally strong," as are sales of the company's Netfinity server computers.
"It sounds like hardware is doing very well," he said. "It's sounding like they're coming out of the box very strongly this quarter."
Hardware sales tend to be the wild card in IBM's business, which is roughly divided into hardware, software and services. After a disappointing fourth quarter, the hardware division performed much better than analysts expected in the first quarter.
IBM is expected to hold a meeting with Wall Street analysts Wednesday. Mr. Helmig said he didn't expect anything "profound" from IBM Chairman and Chief Executive Louis Gerstner Jr., but added that he expects the tone of the meeting to be optimistic.
Big Blue has benefited from strong PC sales, a surprise in the midst of brutal industrywide competition in which IBM had previously been a loser. Analysts even say IBM is stealing market share from rivals like Compaq Computer Corp., especially in the lucrative market for small servers.
The first-quarter results confounded conventional wisdom on IBM, which has been written off in some technology circles as a mature, slow-growth company destined to lose hardware share to nimbler rivals such as Compaq and Dell Computer Corp.
Still, providing computer services has become the main growth engine for IBM. Together, services and software accounted for 60% of the company's gross profit in the first quarter, reflecting Big Blue's reduced dependence on its traditional lines of hardware
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