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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: Mama Bear who wrote (60773)	10/17/2000 9:56:10 PM
From: StockDung	Respond to of 122087

IBM's Numbers Come in as Expected, but Cautious Outlook Pummels Its Shares By Thomas Lepri Staff Reporter 10/17/00 7:28 PM ET Updated from 4:26 p.m. ET It's not awesome. It's not awful. It's IBM (IBM:NYSE) . IBM reported third-quarter earnings generally in line with Wall Street's estimates after the close of regular trading Tuesday. The company said it earned $1.96 billion, or $1.08 a share, in the period. That figure is up from operating income of $1.7 billion, or 90 cents a share, that the company recorded a year ago. Analysts polled by First Call/Thomson Financial expected it would earn $1.06 a share. The company reported revenue of $21.78 billion, a meager 3% higher than the year-ago period and at the low end of analysts' expectations, making it certainly no blowout. IBM offered a few reasons why sales were a little light. Sales in the company's microelectronics business were affected by a low supply of chips and ceramic substrates used to package those chips. That held down sales growth by at least 2 percentage points, according to the company. Meanwhile, anticipation over the upcoming Freeway mainframe depressed sales of the current System/390 family of servers. Lastly, software revenue ran into a wall in September as rapid turnover in the company's sales force left it unable to close deals already in the pipeline. Investors remembering the problems IBM had producing high-end disk drives earlier this year likely won't have much patience for these new execution problems. But there were a couple of positive signs. The formerly troubled PC unit was profitable, and new signings for services totaled $13.1 billion -- well off the second quarter's $20 billion in new signings, but still a strong showing. Still, given the problems it described, how was IBM able to grow the bottom line by 20%? It did it the CEO Lou Gerstner way: controlling costs. The company said total expenses fell 5% from a year ago. In addition, a stock buyback costing about $1.4 billion boosted earnings by about 3 cents a share. IBM's outlook for the fourth quarter wasn't outstanding. On the company's conference call, IBM CFO John Joyce noted that the decline of the euro hurt third-quarter earnings to the tune of 1 cent a share. But the fourth quarter could be worse, since the rapid deterioration of that currency didn't give the company time to hedge enough, he said. On the fourth-quarter revenue picture, Joyce would merely say that sales growth would be "better than the third quarter." That indicates revenue growth somewhere above 3%, not exactly music to the ears of investors who'd been told by Gerstner in July to expect IBM's long-term sales growth to be in the high-single digits. As for the bottom line, Joyce said the company would "strive to achieve" consensus earnings per share. But it never looks good when you try too hard. IBM's stock, which closed in New York trading at $113, was lately at $100 a share. -------------------------------------------------------------------------------- Send letters to the editor to letters@thestreet.com. Top Read our conflicts and disclosure policy.