Palmisano added that IBM expects to add 10,000 new jobs next year.
IBM Meets Forecast, Optimistic on Outlook
By THE ASSOCIATED PRESS
Filed at 4:51 p.m. ET
NEW YORK (AP) -- Bountiful services contracts helped third-quarter profits at IBM Corp. match analysts' expectations Wednesday, and the technology bellwether offered an unusual dose of optimism about the industry's prospects for a turnaround.
In the three-month period that ended Sept. 30, IBM had net earnings of $1.79 billion, or $1.02 per share, a 37 percent gain from the comparable period in 2002, when Big Blue showed profits of $1.31 billion, or 76 cents per share.
Revenue jumped about 9 percent to $21.52 billion in the third quarter, from $19.82 billion a year ago. The comparison figure excludes discontinued operations such as the disk-drive business IBM sold to Hitachi Ltd.
The consensus of analysts surveyed by Thomson First Call was for earnings of $1.02 per share. IBM fell short of Wall Street's revenue forecast of $21.9 billion.
IBM executives had been guarded about the future in previous earnings reports this year, but chairman and chief executive Sam Palmisano said in a statement Wednesday that ``we are beginning to see signs that the economy has stabilized.''
``As we look to 2004, more customers are expected to increase their investments in information technology,'' he said. ``Although it is too early to say that a rebound is at hand, we are confident that we will benefit from both a pick up in (information-technology) spending and an economic recovery.''
Palmisano added that IBM expects to add 10,000 new jobs next year.
IBM shares fell 16 cents to close at $92.74 on the New York Stock Exchange before the earnings report, and fell $2.36 to $92.74 in extended trading.
IBM's report came a day after chip-making giant Intel Corp. also offered indications that corporate technology spending might be reviving.
With tech budgets still tight in the third quarter, IBM's services division stood out as a bright spot, with revenue jumping 17 percent -- 11 percent without currency fluctuations -- to $10.4 billion, nearly half the company's total. IBM bolstered its services business with last year's $4 billion acquisition of the consulting arm of PricewaterhouseCoopers.
IBM also said it signed more than $15 billion in services contracts in the quarter.
Perhaps the biggest blight on IBM's results has been its semiconductor operation, which makes chips for IBM servers and mainframes and for other companies but has had to cut jobs and pay at several chip factories in recent months. In the first half of 2003, IBM's chip-making technology group lost $122 million amid a 24 percent drop in revenue.
This earnings report revealed continued trouble. IBM's technology group showed a pre-tax loss of $96 million and a 30 percent drop in revenue.
Overall, IBM earned $4.9 billion, $2.77 per share, on revenue of $63.2 billion in the first nine months of 2003. Those figures all improved from the first three quarters of 2002, when IBM earned $2.6 billion, $1.47 per share, on revenue of $57.5 billion.
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