Amazing. IBM blames Y2K! (They must be able to get the DOJ in there somewhere too! Maybe that's next quarter.)
S80 sales ares "said to be going strong", but are the only "strong-selling" product line for which no numbers are given. They must be going so strong that IBM is just too darned decent to make everybody else feel bad by giving them out.
--QS
Headline: IBM Q1 revenues seen flat, even as rival Sun soars
By Nicole Volpe NEW YORK, April 14 (Reuters) - International Business Machines Corp. (NYSE:IBM), the world's largest computer maker, is expected to show almost no revenue growth when it reports its first quarter results next week, largely due to a lingering slowdown in spending among customers bracing for the Year-2000 date change.
While IBM wasn't the only computer maker affected by Y2K, the slack growth at Big Blue stood out in sharp contrast to rival Sun Microsystems Inc. (NASDAQ:SUNW), which on Thursday reported its revenues soared 35 percent.
"With weak hardware sales adversely impacting services and software growth, IBM may grow overall revenue by less than our first quarter forecast of 2 percent," said Wit Soundview analyst Gary Helmig.
Corporate capital spending on computers generally generally failed to return immediately after the one-time millennium date change, as many had hoped. Analysts appear uncertain as to when corporate customers would resume spending. In the first quarter of 1999, IBM had revenues of $20.3 billion.
Analysts said investors are more likely to focus on the revenue numbers, rather than earnings figures. The company was expected to meet analysts' estimates for earnings of 78 cents per share, also flat with a year ago.
Sluggish sales were felt by several companies in the computer industry -- computer hardware and services provider Unisys Corp. (NYSE:UIS) reported a revenue shortfall, citing Y2K as having hurt its financial services business. IBM makes some one-third of its revenues from the financial services sector, prompting Helmig to warn that IBM faced similar issues to those that sapped Unisys results in the first quarter.
But Sun Microsystems, the leading maker of powerful computers used to run Web sites, on Thursday reported revenues soared by more than a third to $4 billion in its fiscal third quarter.
"Sun is in the sweet spot in the market right now, and IBM is not," said Salomon Smith Barney analyst John Jones. "IBM is trying to get there."
Sun executives said they had gained market share at the expense of slower-growing rivals IBM and Hewlett-Packard Co.(NYSE:HWP).
Dell Computer Corp. (NASDAQ:DELL), a competitor with IBM in both the personal computer and servers that run on chips from Intel Corp. (NASDAQ:INTC), said it is expecting growth to hover in the low 30-percent range throughout the year.
While analysts have seen signs that IBM's business began to pick up toward the end of the quarter, officials of the Armonk, N.Y.-based company have cautioned that healthy double-digit revenue growth is unlikely until the second half of 2000.
"IBM customers had been through two years of excruciating work, testing, testing testing," said Jones. "For IBM customers, Y2K was a dramatically different process (than for Sun or other computer makers' customers)."
Sun, a 15-year-old company, sells a variety of computer systems that had few problems handling the Year 2000 date change. By contrast, IBM has mainframe computer customers going back decades, resulting in knottier computer upgrade issues.
IBM also faces a tough comparison compared to the first and second quarters of 1999, when corporate customers spent heavily on new computers in advance of the Year 2000 transition and the freeze on new installations that occurred late last year.
"Are things getting better? Yes," said Robertson Stephens analyst Dan Niles. "Are they taking longer than expected? Yes. I don't see a lot of revenue growth until the second half."
Analysts said they expected IBM to meet the analyst consensus estimate of $0.78 published by First Call/Thomson Financial, which tallies analysts estimates.
IBM did see a strong showing in certain hardware lines. Its Netfinity line of personal computer servers based on chips from Intel Corp. (NASDAQ:INTC) were seen as growing at double the industry rate.
Netfinity Marketing Director James Gargan said that the Netfinity line was growing at more than two times the industry rate on a revenue basis, meaning growth rates around the 60 percent range.
"That growth has stayed the same as it has been," he said. "On a revenue basis it has been even better (than two times the industry average)," he said."
More complex servers that run UNIX operating systems, such as the RS/6000 and the S80 were said to be going strong. IBM's semiconductor business, like the computer chip industry at large, was seen to be in a boom, with 50 percent growth expected this quarter and 40 percent growth for the year, analysts said.
Non-hardware businesses were estimated to bring 58 percent of the revenue in the quarter, analysts said. "Non hardware businesses...are a key reason we believe Chief Executive (Louis) Gerstner confidently talks about growth rates above the 9.5 percent IT (information technology) industry average," said Jones.
Analysts said software would grow at between 6 and 8 percent. Global Services, which is a third of IBM's business, also faced difficult comparisons to a year ago, when the company carried out a lot of integration services, analysts said.
In midmorning trade on the Big Board, Big Blue was off 3/8 at 110-1/8.
Copyright 2000, Reuters News Service |
