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Strategies & Market Trends : TradersChoice 2000 -- Ignore unavailable to you. Want to Upgrade?

To: Jeff Jordan who wrote (489)	10/20/1999 7:08:00 PM
From: Jeff Jordan	Read Replies (1) \| Respond to of 604

SPZ 1286 from 1299 after close......easy come, easy go? IBM posts disappointing Q3 revenues IBM's third-quarter earnings, reported Wednesday, were in line with analyst expectations, but revenue came in lighter than anticipated. "It was a decidedly mixed quarter," said Lou Gerstner, chairman and CEO of the Armonk, N.Y., computer giant. In results released after the close of market, IBM reported earnings of $1.8 billion, or 93 cents per share. However, that included a one-time gain of $63 million, or 3 cents per share. First Call's survey of 22 analysts forecast a profit of 90 cents per share for the quarter ended Sept. 30. But quarterly revenue rose to a less-than-expected $21.1 billion. Analyst consensus had predicted revenue of $21.7 billion for IBM. A sale of some network businesses helped cut gross margins to 35.7 percent from 37.2 percent in the year-earlier period. Hold on to your hats Analysts weren't happy about the results. "This is even uglier than I expected," Robertson Stephens analyst Dan Niles told Reuters. "This is not IBM-specific, it's an industrywide problem, and they're finally admitting that they have issues. We're going to have to take our numbers down. ... I thought they would squeak through on the third quarter. They said they're blowing the fourth quarter even worse than I had expected." The company blamed corporate spending slowdowns related to year 2000 preparation for hurting sales of large servers, services and operating systems. Shortages of flat-panel displays, continued price pressure in the hard-disk market and sales disruptions related to IBM's divestitute of some network hardware assets also hurt the company's revenue, Gerstner said. "There were concerns about some of the revenue characteristics and, more importantly, there was some sort of veiled warning about Y2K and the fourth quarter," said Barry Hyman, market strategist with Ehrenkrantz, King Nussbaum. "They indicated component shortages and that was no different than what Intel and Dell Computer said," Hyman continued. "It's going to impact the market tomorrow on the opening. The technology market, which was very strong today, will be a little bit nervous." IBM expects Y2K projects to reduce customers' spending in the fourth quarter and early in the first of next year. "Next year has the potential to be a very good year for IBM," Gerstner said. "Once we get past any lingering Y2K effects." Services revenue, adjusted for the recent sale of the IBM Global Network and excluding maintenance contracts, rose 19 percent as gross margins rose to 27.6 percent from 25.9 percent. IBM ended the third quarter with a services backlog of $57.5 billion. Hardware sales fell 1 percent year-over-year to $8.8 billion, as AS/400 revenue dropped "significantly." System 390 sales also declined, with the company blaming price reductions and Y2K effects. RS/6000 revenue slid slightly, while Netfinity servers saw especially strong growth. Software revenue increased 7 percent, led by sales of middleware such as subsidiary Tivoli's system management, database and transaction processing products. Revenues from Global Financing increased 14 percent in the quarter to $774 million. IBM's Asia-Pacific business rose 28 percent to $3.7 billion, while revenue in the Americas slid 1 percent to $9.6 billion and Europe/Middle East/Africa sales dropped 2 percent to $5.8 billion. The company, which has continually repurchased stock throughout Gerstner's tenure, spent $1.5 billion on share buybacks during the quarter. Shares of IBM fell 1/8 to 107 in Wednesday's regular trading prior to the earnings report. But the stock fell 7 3/4 to 105 in trading after the bell.