like i said, the spin would be on services
ARMONK, N.Y.--(BUSINESS WIRE)--July 17, 2002--IBM (NYSE:IBM.N)--
-- Total diluted earnings per common share of $.03, including
$.81 of incremental charges; $.84 excluding charges;
-- Total net income of $56 million, including $1.4 billion of
incremental charges;
-- Total revenues $20.0 billion, including $379 million from hard
disk drive unit
IBM today announced second-quarter 2002 diluted earnings per
common share of $.03, including $.81 per diluted share of incremental
charges associated with the realignment of the Microelectronics
Division, the agreement to sell the hard disk drive business, and
workforce reductions, compared with diluted earnings per common share
of $1.15 in the second quarter of 2001. Excluding the charges, diluted
earnings per common share would be $.84. Second-quarter net income
from all operations was $56 million, including $1.4 billion in
incremental charges -- $2.1 billion before tax -- compared with $2.0
billion in net income in the second quarter of 2001. Excluding the
charges, net income would be $1.45 billion. Total revenues for the
second quarter of 2002 of $20.0 billion, which includes $379 million
of revenues from hard disk drive unit, were a 7 percent decrease from
the second quarter of 2001.
Samuel J. Palmisano, IBM president and chief executive officer,
said: "I'm proud that the IBM team generated $20 billion in revenues
in the second quarter -- one of the most difficult capital spending
environments we've seen in decades. Our performance, even in this
difficult market, reaffirms the strength of our portfolio and that our
strategies are on target. At the same time, we took aggressive actions
in the quarter that will strengthen IBM for long-term industry
leadership and further improve our cost and expense structure. These
actions will immediately strengthen our overall results.
"Our software business achieved solid growth, gaining share across
the middleware portfolio. Werecorded our ninth consecutive quarter of
new services signings of $10 billion or more. Also, we held overall
share in server and storage systems in the face of pricing and demand
pressures. Our margins improved sequentially, and the balance sheet
remains strong.
"As we look forward, we remain confident that IBM will continue to
gain or hold share in our high-priority growth areas of our industry."
As previously announced, the company has reached an agreement to
sell its hard disk drive business and, therefore, the results from
continuing operations exclude the HDD business. The HDD business is
presented separately as discontinued operations.
IBM's second-quarter revenues from continuing operations were
$19.7 billion, down 6 percent (6 percent at constant currency)
compared with the second quarter of 2001. Diluted earnings per common
share from continuing operations was $.25, or $.89 per diluted share
before the charges associated with the realignment of the
Microelectronics Division and workforce reductions, compared with
$1.17 in the second quarter of 2001. Second-quarter net income from
continuing operations was $445 million, or $1.6 billion before the
charges, compared with $2.1 billion in net income in the second
quarter of 2001.
From discontinued operations, IBM reported a net loss of $389
million, or $.22 per diluted share in the second quarter of 2002.
Additional detail regarding the charges will be provided during
IBM's regular quarterly earnings conference call, which is scheduled
to begin at 4:30 p.m. EDT, today. Investors may participate by viewing
the webcast at www.ibm.com/investor.
From continuing operations, in the Americas, second-quarter
revenues were $9.0 billion, a decrease of 5 percent (4 percent at
constant currency) from the 2001 period. Revenues from Europe/Middle
East/Africa were $5.6 billion, down 3 percent (7 percent at constant
currency). Asia-Pacific revenues declined 3 percent (2 percent at
constant currency) to$4.1 billion. OEM revenues decreased 32 percent
(31 percent at constant currency) to $844 million compared with the
second quarter of 2001.
Revenues from IBM Global Services, including maintenance, declined
1 percent (2 percent at constant currency) in the second quarter to
$8.7 billion. Global Services revenues, excluding maintenance,
declined 1 percent (2 percent at constant currency). IBM signed $10.6
billion in services contracts in the quarter.
Hardware revenues from continuing operations decreased 16 percent
(17 percent at constant currency) to $6.7 billion from the 2001 second
quarter. Revenues declined significantly in most areas of our server
business. Importantly, shipments of IBM zSeries mainframes grew 4
percent, as measured in MIPS (Millions of Instructions Per Second).
The IBM xSeries had low, double-digit revenue growth.
Personal computer revenues declined year over year. Revenues from
Microelectronics decreased from a year ago, reflecting the ongoing
weakness in demand for semiconductor products.
Software revenues increased 8 percent (7 percent in constant
currency) to $3.3 billion compared to the prior year's second quarter.
Middleware products, which include WebSphere and DB2 and which
comprise 80 percent of IBM's software revenues, grew 10 percent at
constant currency in the second quarter. WebSphere, IBM's leading
e-business middleware product, grew 17 percent from a year ago. IBM's
leading database management software, DB2, grew 11 percent, helped in
part by the acquisition of Informix. Revenues from Tivoli continued to
rebound year over year. Operating systems revenues declined.
Global Financing revenues decreased 2 percent (3 percent at
constant currency) in the second quarter to $825 million. Revenues
from the Enterprise Investments/Other area, which includes industry-
specific IT solutions, declined 23 percent (22 percent at constant
currency) compared to the second quarter of 2001 to $227 million.
The company's totalgross profit margin from continuing operations
was 37.0 percent in the 2002 second quarter, down from 38.3 percent in
the 2001 second quarter but up nearly one point from the first quarter
of 2002.
Second-quarter expense from continuing operations was $6.7
billion, with a total expense-to-revenue ratio of 34.0 percent, 9.7
points higher than the year-earlier period, primarily due to charges
associated with the second-quarter actions. Selling, general and
administrative expense was up 26 percent. Without those charges that
apply to SG&A expense, however, SG&A would have been flat in the
quarter.
IBM's tax rate from continuing operations in the second quarter
was 25.3 percent compared with 28.9 percent in the second quarter of
2001. Second-quarter 2002 tax rate is slightly lower due to the effect
of the second-quarter actions. For the full-year 2002, the continuing
operations tax rate is expected to be approximately 30 percent.
IBM spent approximately $1.8 billion on share repurchases in the
second quarter. The average number of basic common shares outstanding
in the quarter was 1.71 billion compared with 1.74 billion shares in
the same period of 2001. There were 1.69 billion basic common shares
outstanding at June 30, 2002.
Cash on the balance sheet was $3.6 billion at June 30, 2002.
Debt totaled $25.8 billion including global financing, a decline
of $1.3 billion from year-end 2001. The core debt-to-capitalization
ratio was 4 percent at the end of the second quarter, and global
financing debt declined $335 million from year-end 2001 to a total of
$25.2 billion, resulting in a debt-to-equity ratio of 6.9 to 1.
Net income from continuing operations for the six months ended
June 30, 2002 was $1.7 billion, or $.98 per diluted common share after
incremental charges of $1.1 billion, or $1.62 per diluted common share
before the charges. Net income from continuing operations for the
first six months of 2001 was $3.9 billion or $2.17 per diluted common
share. Revenues from continuing operations for the six months ended
June 30, 2002 totaled $37.7 billion, a decrease of 8 percent (7
percent at constant currency) compared with $41.1 billion for the six
months of 2001.
For the first six months of 2002, net loss from discontinued
operations was $481 million, or $.28 per diluted common share.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained
herein, statements contained in this release may constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve a number of
risks, uncertainties and other factors that could cause actual results
to differ materially, as discussed in the company's filings with the
Securities and Exchange Commission.
Financial Results Attached
-0-
*T
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
Percent Percent
2002 2001 Change 2002 2001 Change
------- ------- ------- -------- -------- -------
REVENUE
Global Services $8,661 $8,742 -0.9% $16,890 $17,213 -1.9%
Gross margin 26.3% 27.6% 26.1% 26.6%
Hardware 6,672 7,918 -15.7% 12,556 15,730 -20.2%
Gross margin 24.8% 32.1% 24.6% 32.1%
Software 3,266 3,036 7.6% 6,163 5,954 3.5%
Gross margin 84.7% 82.4% 83.0% 81.3%
Global Financing 825 845 -2.4% 1,608 1,677 -4.1%
Gross margin 56.8% 48.2% 56.7% 47.7%
Enterprise Investments/
Other 227 293 -22.6%464 569 -18.6%
Gross margin 45.8% 43.3% 51.1% 46.3%
TOTAL REVENUE 19,651 20,834 -5.7% 37,681 41,143 -8.4%
GROSS PROFIT 7,270 7,987 -9.0% 13,770 15,522 -11.3%
Gross margin 37.0% 38.3% 36.5% 37.7%
EXPENSE AND OTHER INCOME
S,G&A 5,288 4,182 26.4% 9,311 8,265 12.7%
% of revenue 26.9% 20.1% 24.7% 20.1%
R,D&E 1,198 1,284 -6.7% 2,333 2,493 -6.4%
% of revenue 6.1% 6.2% 6.2% 6.1%
Intellectual property
and custom development
income (243) (354) -31.4% (539) (619) -12.9%
Other (income)
and expense 399 (124) -422.6% 194 (193) -200.8%
Interest expense 33 58 -42.7% 63 128 -50.8%
TOTAL EXPENSE AND
OTHER INCOME 6,675 5,046 32.3% 11,362 10,074 12.8%
% of revenue 34.0% 24.2% 30.2% 24.5%
INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES 595 2,941 -79.8% 2,408 5,448 -55.8%
Pre-tax margin 3.0% 14.1% 6.4% 13.2%
Provision for
income taxes 150 850 -82.3% 679 1,580 -57.0%
Effective tax
rate 25.3% 28.9% 28.2% 29.0%
NET INCOME FROM CONTINUING
OPERATIONS $445 $2,091 -78.7% $1,729 $3,868 -55.3%
Net margin 2.3% 10.0% 4.6% 9.4%
Preferred stock
dividends 0 10
NET INCOME FROM
CONTINUING OPERATIONS
APPLICABLE TO COMMON
SHAREHOLDERS $445 $2,086 -78.7% $1,729 $3,858 -55.2%
DISCONTINUED OPERATIONS
(NET OF TAX) ($389) ($46) ($481) ($73)
NET INCOME
AFTER DISCONTINUED
OPERATIONS $56 $2,040 -97.3% $1,248 $3,785 -67.1%
====== ====== ====== ======
EARNINGS PER SHARE
OF COMMON STOCK:
ASSUMING DILUTION
CONTINUING
OPERATIONS $0.25 $1.17 -78.6% $0.98 $2.17 -54.8%
DISCONTINUED
OPERATIONS ($0.22) ($0.03) ($0.28) ($0.04)
------ ------ ------ ------
TOTAL AFTER
DISCONTINUED
OPERATIONS $0.03 $1.15* -97.4% $0.71* $2.13 -66.7%
EARNINGS PER SHARE
OF COMMON STOCK:
BASIC
CONTINUING
OPERATIONS $0.26 $1.20 -78.3% $1.01 $2.22 -54.5%
DISCONTINUED
OPERATIONS ($0.23) ($0.03) ($0.28) ($0.04)
------ ------ ------ ------
TOTAL AFTER
DISCONTINUED
OPERATIONS $0.03 $1.17 -97.4% $0.73 $2.18 -66.5%
====== ====== ====== ======
AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)
DILUTED 1,730.4 1,777.7 1,741.7 1,779.5
BASIC 1,705.0 1,738.2 1,711.7 1,739.6
* Does not total due to rounding.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited)
At At
(Dollars in millions) June 30, December 31, Percent
2002 2001 Change
-------- ----------- -------
ASSETS
Cash, cash equivalents,
and marketable securities $3,567 $6,393 -44.2%
Receivables - net, inventories,
prepaid expenses 33,193 36,068 -8.0%
Plant, rental machines,
and other property - net 14,712 16,504 -10.9%
Investments and other assets 30,511 29,348 4.0%
Assets of discontinued
operations 2,228 --
-------- --------
TOTAL ASSETS $84,211 $88,313 -4.6%
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $9,571 $11,188 -14.5%
Long-term debt 16,270 15,963 1.9%
-------- --------
Total debt 25,841 27,151 -4.8%
Accounts payable, taxes,
and accruals 23,011 23,931 -3.8%
Other liabilities 13,772 13,617 1.1%
Liabilities of discontinued
operations 192 --
-------- --------
TOTAL LIABILITIES 62,816 64,699 -2.9%
STOCKHOLDERS' EQUITY 21,395 23,614 -9.4%
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $84,211 $88,313 -4.6%
======== ========
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
SECOND QUARTER 2002
----------------------------------------------
Pre-tax
Income
(Loss)
From
(Dollars in millions) --------- Revenue -------- Continuing Pre-tax
External Internal Total Operations Margin
-------- -------- ------- ---------- -------
SEGMENTS
Global Services $8,661 $741 $9,402 $706 7.5%
% change -0.9% 14.0% 0.1% -46.0%
Enterprise Systems 2,934 160 3,094 182 5.9%
% change -15.6% -22.0% -16.0% -65.4%
Personal and Printing
Systems 2,80033 2,833 (35) -1.2%
% change -8.7% 135.7% -8.0% -337.5%
Technology 1,003 199 1,202 (943) -78.5%
% change -27.3% -48.7% -32.0% NM
Software 3,266 315 3,581 913 25.5%
% change 7.6% 33.5% 9.4% 28.4%
Global Financing 818 193 1,011 237 23.4%
% change -2.4% -11.1% -4.2% -18.6%
Enterprise Investments 223 1 224 (81) -36.2%
% change -22.3% -22.0% -200.0%
TOTAL SEGMENTS 19,705 1,642 21,347 979 4.6%
% change -5.4% -4.0% -5.3% -66.3%
Eliminations / Other (54) (1,642) (1,696) (384)
TOTAL IBM $19,651 $0 $19,651 $595 3.0%
% change -5.7% -5.7% -79.8%
NM - Not Meaningful
SECOND QUARTER 2001
----------------------------------------------
Pre-tax
Income
(Loss)
From
(Dollars in millions) --------- Revenue -------- Continuing Pre-tax
External Internal Total Operations Margin
-------- -------- ------- ---------- -------
SEGMENTS
Global Services $8,742 $650 $9,392 $1,307 13.9%
Enterprise Systems 3,477 205 3,682 526 14.3%
Personal and Printing
Systems 3,067 14 3,081 (8) -0.3%
Technology * 1,380 388 1,768 102 5.8%
Software 3,036 236 3,272 711 21.7%
Global Financing 838 217 1,055 291 27.6%
Enterprise Investments 287 0 287 (27) -9.4%
TOTAL SEGMENTS 20,827 1,710 22,537 2,902 12.9%
Eliminations / Other * 7 (1,710) (1,703) 39
TOTAL IBM $20,834 $0 $20,834 $2,941 14.1%
* Reclassified to conform with 2002 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
SIX MONTHS 2002
----------------------------------------------
Pre-tax
Income
(Loss)
From
(Dollars in millions) --------- Revenue -------- Continuing Pre-tax
External Internal Total Operations Margin
-------- -------- ------- ---------- -------
SEGMENTS
Global Services $16,890 $1,381 $18,271 $1,779 9.7%
% change -1.9% 11.5% -1.0% -25.1%
Enterprise Systems 5,418 326 5,744 359 6.3%
% change -18.1% -12.4% -17.8% -60.9%
Personal and Printing
Systems 5,311 46 5,357 30 0.6%
% change -14.9% 43.8% -14.6% 145.5%
Technology 1,933 435 2,368 (1,082) -45.7%
% change -34.6% -40.2% -35.7% -552.7%
Software 6,163 542 6,705 1,473 22.0%
% change 3.5% 20.4% 4.7% 13.6%
Global Financing 1,586 379 1,965 459 23.4%
% change -5.1% -14.4% -7.1% -18.6%
Enterprise Investments 454 2 456 (134) -29.4%
% change -15.9% 100.0% -15.7% 19.8%
TOTAL SEGMENTS 37,755 3,111 40,866 2,884 7.1%
% change -8.3% -4.7% -8.1% -44.1%
Eliminations / Other (74) (3,111) (3,185) (476)
TOTAL IBM $37,681 $0 $37,681 $2,408 6.4%
% change -8.4% -8.4% -55.8%
SIX MONTHS 2001
----------------------------------------------
Pre-tax
Income
(Loss)
From
(Dollars in millions) --------- Revenue -------- Continuing Pre-tax
External Internal Total Operations Margin
-------- -------- ------- ---------- -------
SEGMENTS
Global Services $17,213 $1,239 $18,452 $2,375 12.9%
Enterprise Systems 6,613 372 6,985 917 13.1%
Personal and Printing
Systems 6,243 32 6,275 (66) -1.1%
Technology * 2,954 727 3,681 239 6.5%
Software 5,954 450 6,404 1,297 20.3%
Global Financing 1,672 443 2,115 564 26.7%
Enterprise Investments 540 1 541 (167) -30.9%
TOTAL SEGMENTS 41,189 3,264 44,453 5,159 11.6%
Eliminations / Other * (46) (3,264) (3,310) 289
TOTAL IBM $41,143 $0 $41,143 $5,448 13.2%
* Reclassified to conform with 2002 presentation.
*T
--30--sdg/ny*
CONTACT: IBM, Armonk
Bill Hughes, 914/499-6565
bhughes@us.ibm.com
or
Carol Makovich, 914/499-6212
makovich@us.ibm.com
KEYWORD: NEW YORK
INDUSTRY KEYWORD: HARDWARE SOFTWARE COMPUTERS/ELECTRONICS
EARNINGS CONFERENCE CALLS ADVISORY
SOURCE: IBM
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