IBM ($64-$74)..P/E 23...beats by 3 cents, reaffirms..
16-Oct-02
16:08 ET IBM beats by three cents (IBM) 64.90 -3.58: Reports Q3 (Sep) earnings of $0.99 per share, $0.03 better than the Multex consensus of $0.96; revenues were $19.8 billion vs the Multex consensus estimate of $19.8 billion.
16-Oct-02
16:52 ET IBM lowering pension plan rate of return assumptions (IBM) 64.90 -3.58: -- Update -- On call, says it is lowering its rate of return assumptions for its pension plan in 2003 to 8.0-8.5% (from 9.5% in 2002)... notes that this assumption will affect income statement by roughly $700 mln, but impact will be offset by $900 mln in productivity savings... says its working assumption is that it will contribute as much as $1.5 bln to the U.S. pension plan with plan for it to be fully funded by 2005... IBM +2.10 at 67.00
16-Oct-02
17:09 ET IBM comments on PwC acquisition (IBM) 64.90 -3.58: -- Update -- On call, says it continues to expects PwC Consulting acquisition to have an impact of about $0.30 per share in Q4 ($0.05 from ongoing operations, including amortization of intangibles; $0.08-0.09 related to deal proceeds; and $0.15-0.16 worth of transition charges)... maintains that deal will be accretive in 2H03 and break-even for full-year... IBM +3.09 at 67.99
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Associated Press
IBM Profits Fall; Beat Expectations
IBM Profits Fall Sharply, but Beat Wall Street Expectations
Thursday October 17, 8:17 am ET
By JIM KRANE, AP Technology Writer
NEW YORK (AP) -- IBM Corp.'s third quarter profits dropped 18 percent, but the technology giant still managed to beat Wall Street's expectations by three cents.
On Wednesday, IBM reported a profit of $1.31 billion, or 76 cents per share on slightly higher revenue of $19.82 billion in the quarter ended Sept. 30. That compares with year-ago profits of $1.60 billion, or 90 cents per share, and revenues of $19.78 billion.
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The Armonk, N.Y.-based company saw revenues slide in its hardware, software and global financing businesses.
IBM chief financial officer John Joyce said the quarter was "one of the toughest spending environments" he'd seen, but that the company's emphasis on its services business -- where revenues rose -- softened the impact.
"Importantly, customers are still spending, (but) their focus isn't on this piece of hardware or that piece of software, but on business services that enhance their overall return," Joyce said in a conference call with analysts.
Excluding discontinued operations -- mainly the company's hard drive business -- IBM reported earnings per share of 99 cents, three cents a share better than the consensus of analysts polled by Thomson First Call.
In trading Wednesday on the New York Stock Exchange, shares of IBM fell $3.58, or 5 percent, to close at $64.90. The company reported its earnings after markets closed.
The company's huge Global Services arm churned out 45 percent of IBM's overall earnings in the quarter. Global Services' revenues rose 2.4 percent to $8.9 billion. Joyce said the unit signed $9 billion in new contracts in the quarter -- a level that has slipped over the past three quarters.
Revenues at IBM's hardware division, the second-largest business unit, dropped by 1 percent to $6.8 billion, and software revenue fell 2.9 percent to $3.11 billion.
Joyce said he was "comfortable" with analysts' expectations for fourth quarter earnings of $1.35 per share. He said it was "too early" to speculate on IBM's performance in 2003.
IBM's current earnings report reflects several structural changes that have moved the company away from the business of manufacturing computer hardware and closer toward maintaining it.
Earlier this year it announced the reorganization of its older aluminum-based semiconductor works, and transferred much of its PC assembly work to contract manufacturer Sanmina-SCI. IBM is also in the process of selling its hard disk manufacturing business to Japan's Hitachi.
At the same time, IBM bolstered its services arm with the $3.5 billion purchase -- completed in this month -- of PricewaterhouseCoopers' consulting arm, PwC.
IBM has said it expects the acquisition and integration of PwC's 30,000 employees will result in a fourth quarter charge of about 30 cents per share. By the end of 2003, IBM expects the additional consulting earnings to cover those costs. PwC will earn $1 billion in the first quarter of 2001, Joyce said.
In August, IBM said it had laid off more than 15,600 workers, or 5 percent of its global work force, which dropped to about 305,000, before the addition of PwC.
Most of the job cuts fell on IBM's Global Services unit, with some workers also laid off in the company's businesses that focus on servers, software and semiconductors.
Besides the acquisition of PwC, Joyce said the low valuations of technology companies allowed IBM to acquire six smaller software companies. He said the company is now reaping the benefits of "routinely" skipping buyout opportunities in the 1990s of overvalued companies.
"We did not speculate during the dot-com bubble," Joyce said. "As valuations have dropped we've been ready to move quickly."
Joyce also noted IBM's pension plan earnings would decline by $700 million next year, but would be offset by $900 million in productivity gains from the job cuts and sales of business units.
Still, Joyce said, IBM needs to bolster funding of the pension plan by about $1.5 billion per year, for the next five years, to close a gap.
For the first nine months of 2002, IBM earned $2.56 billion on revenues of $57.5 billion, 52.5 percent less than the same period last year, when it earned $5.39 billion in profits on revenues of $60.93 billion.
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