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Technology Stocks : EMC How high can it go? -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (14298)	6/5/2002 8:34:19 AM
From: John Carragher	Respond to of 17183

OT interesting a new ceo and all of a sudden IBM has first losing quarter... More manipulation of numbers by large corporations. "When Gerstner came aboard they had big-bath charges. This is the same sort of thing." IBM Plans up to $2.5 Billion Charge Due to Cost Cutting and Asset Sales By WILLIAM M. BULKELEY Staff Reporter of THE WALL STREET JOURNAL International Business Machines Corp. executives said the company plans to take a charge of $2 billion to $2.5 billion for cost cutting and asset sales -- an amount that could cause Big Blue to report its first quarterly net loss in eight years. The charge is expected to fall mainly in the current quarter. Analysts had expected IBM to report second-quarter net income of 87 cents a share, according to Thomson Financial/First Call, or a total of about $1.5 billion in net income. Jay P. Stevens, an analyst with Buckingham Research, said that while a loss under generally accepted accounting principles appears possible, "these are nonoperating losses" and he expects stock analysts will focus on whether IBM's second-quarter results excluding the charge reach the consensus level. IBM declined to be more specific about the size of the second-quarter charge. IBM, after avoiding the turmoil of most other computer makers in 2001, has been struggling this year with big losses in its semiconductor and hard-disk-drive businesses as well as excess staffing in other operations. The expected charge covers a loss related to selling the hard-disk operations to Japan's Hitachi Ltd., and charges for cutting semiconductor capacity and layoffs. Steven Milunovich, an analyst with Merrill Lynch & Co., said IBM was making sound strategic moves. He noted that Samuel J. Palmisano succeeded Louis Gerstner as chief executive in March, and he said he sees history repeating. "When Gerstner came aboard they had big-bath charges. This is the same sort of thing." He said the moves indicate that the Armonk, N.Y., company is backing away from hardware businesses while pushing software and services. IBM stock rose Tuesday $1.20 to $79.31 in 4 p.m. New York Stock Exchange composite trading. IBM is in the midst of a round of layoffs, which has encompassed about 6,800 U.S. workers in the past two weeks, according to a tally by Alliance(at)IBM, a Communications Workers of America affiliate that is trying to organize IBM workers. Tuesday, Mr. Palmisano sent a notice to all U.S. employees saying that the "vast majority" of the layoffs have been concluded. Overseas layoffs haven't been announced. The layoff figures include 1,500 of its 20,000 semiconductor-plant workers who received layoff notices Tuesday. IBM had about 150,000 U.S. workers and nearly 320,000 world-wide workers before the current round of layoffs. Most workers have at least 30 days' notice during which they can look for other jobs within IBM. Earlier this week, IBM said it will sell its money-losing disk-drive operations to Hitachi in a three-year process that involves creating a joint-venture that is 70% owned by Hitachi this year, then selling the remainder over three years. Hitachi will pay a total of $2.05 billion, IBM said. IBM will treat its disk-drive business as a discontinued operation. IBM's chief financial officer, John Joyce, said the actions will "substantially lower IBM's annual operating expenses" and "strengthen the company's strategic position in the near and long term." Gary Helmig, an analyst with Soundview Technology Group, called the cutbacks in the semiconductor unit and the sale of the hard-disk-drive business "good for IBM." IBM, he added, is wise to "get out of nonperforming commodity-like businesses that have no strategic value and zero growth rates." An IBM spokesman said about 950 of the newest layoffs will be at its semiconductor plant near Burlington, Vt. He said IBM is closing some of its excess capacity of aluminum semiconductors there, but will maintain capacity of faster copper chips. The spokesman said IBM also will strive to gain more business for its microelectronics operations by starting a contract electronic design-services business. IBM, however, threw cold water on widespread rumors in Vermont that IBM is trying to sell its plant there, or create a joint venture with another electronics company. Microelectronics chief John Kelly told Vermont workers last week that the plant isn't for sale, a company spokesman said. Write to William M. Bulkeley at bill.bulkeley@wsj.com