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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (44298)	7/16/2003 7:31:26 PM
From: Lazarus_Long	Read Replies (1) \| Respond to of 57110

Looks like IBM did rather well. I'm not sure what numbers were expected, though. This could be the cause: IBM Chief executive Samuel J. Palmisano offered little hope to investors looking for signs of an economic upturn, labeling it a "challenging economic environment." IBM Earnings, Revenue Rise, Boosted by Recent Acquisitions By WILLIAM M. BULKELEY Staff Reporter of THE WALL STREET JOURNAL International Business Machines Corp., led by strong services business, reported net income of $1.71 billion, or 97 cents a share, up sharply from year-earlier results that were battered by the computer-spending slowdown and operational retrenchment. That compared with net income of $56 million, or three cents a share, the previous year. However, IBM Chief executive Samuel J. Palmisano offered little hope to investors looking for signs of an economic upturn, labeling it a "challenging economic environment." Revenue rose 10% to $21.63 billion from $19.65 billion, but most of the increase came from currency gains, and shipments were only up 3% at constant currency. Without big acquisitions of the PricewaterhouseCoopers consulting arm in 2002 and Rational Software Inc. earlier this year, revenue would have declined. IBM said income from continuing operations matched analysts' expectations of $1.7 billion, or 98 cents a share, as reported by First Call. In the year-earlier quarter, income from continuing operations was $445 million, or 25 cents a share including charges of $1.1 billion. Excluding the charges, IBM said its earnings per share rose 10%. Charges and asset write-downs in the year-earlier period stemmed from layoffs and plant closings and IBM's sale of its unprofitable disk-drive business to Hitachi Ltd., which led to treating those operations as a discontinued operation. The year-earlier quarter was IBM's most eventful in a decade for restructuring, and reflected the dramatic shrinking of budgets by corporate computer users around the world. In a conference call with investors, Chief Financial Officer John Joyce said "we remain on track to meet analysts full-year average revenues and profit forecasts." According to Multex, analysts expect full-year earnings per share of $4.32 a share, up from $3.95 a share last year before charges. They expect revenue to rise to $88.23 billion from $81.19 billion. Steven Milunovich, an analyst with Merrill Lynch & Co. said that the IBM remarks, and comments by EMC Corp. which reported earlier in the day "kind of suggest a hope for improvement" for information-technology spending. He said that corporate buyers he interviews say they expect to spend their budgets this year, rather than "underspend" as they did last year. And he noted that Mr. Joyce had said price cuts have slowed, resulting in improved margins on most IBM products. IBM's services business, which accounts for nearly half its revenue, saw revenue rise 23% and pretax income rise 65%, reflecting the impact of the PricewaterhouseCoopers acquisition. The biggest negative factor for IBM was its microelectronics business which makes semiconductors for IBM and customers such as Apple Computer Inc. IBM has built a $3 billion plant for that business, but Mr. Joyce said it had trouble getting machinery to work right in the plant during the quarter, and the operation suffered a loss of $111 million and won't be profitable for the year, as previously anticipated, he said. The results are likely to increase investor anxiety about chip fabrication, which some think doesn't fit with IBM's services and software strategy. But IBM says it needs the plant to build the advanced microprocessors that power its mainframes. IBM's server and storage business grew 10% in the quarter, even though mainframe sales declined as customers waited for a new line of mainframes dubbed T-Rex. Sale of those machines didn't start until the last two weeks of the quarter, and Mr. Joyce said key software packages needed by banks won't be available until the end of the third quarter. PC sales fell 2.7%, but the operation had a loss of only $8 million, a far cry from the hundreds of millions it was losing each quarter a few years ago. online.wsj.com