IBM (NYSE:IBM) Q1 hit by currency, Asia, PC pricing
Reuters, Monday, April 20, 1998 at 17:23
ARMONK, N.Y., April 20 (Reuters) - International Business
Machines Corp. said Monday its first-quarter profits fell from
year-ago levels, as a variety of one-time factors, the strong
U.S. dollar and economic weakness in Asia held back earnings.
Still, IBM, the world's largest computer company, beat Wall
Street estimates with first-quarter earnings of $1.0 billion,
or $1.06 per diluted share. Analysts had expected the company
to earn $1.05 in the quarter, according to a First Call survey.
The results represented a decline from a profit of $1.2
billion, or $1.16 per share, a year ago. IBM's earnings per
share would have declined more sharply if not for the company's
aggressive share repurchases, which totaled $1.8 billion in the
quarter.
The company said it benefited from strong performances in
its mid-range server, software, services and original equipment
manufacturing (OEM) businesses during the first three months of
the year.
A lower tax rate also helped. The company has been shifting
manufacturing around the world in an effort to reduce its tax
burden. It had an overall tax rate of 32.0 percent in the
quarter, down from 35.5 percent in the same period a year ago.
Louis Gerstner, IBM chairman and chief executive, said
results at the company's personal computer business were hurt
by tough price competition, which pushed the company to make
substantial price reductions on several lines of its machines.
"Our PC business suffered from a severe price war that was
greater than anticipated," Gerstner said in a statement.
"We made the decision to protect our franchise and to
compete, and compete strongly. That decision also reduced
first-quarter results," he said, referring to the effect of the
company's PC price cuts.
Gerstner cautioned that the cutthroat price competition was
expected to continue in upcoming quarters.
"As to the future, although we expect PC price pressures to
continue, we are very pleased with the underlying momentum of
our other businesses," Gerstner said. He said he expected IBM's
non-PC operations to offset any shortfall in personal computers.
North American first-quarter revenues climbed to $8.3
billion, up 4 percent compared with the first quarter a year
ago.
Revenues from Europe/Middle East/Africa rose to $5.4
billion, an increase of 2 percent, or 9 percent if the effects
of currency translation were eliminated. Asia-Pacific revenues
were $3.2 billion, down 6 percent, though 2 percent higher if
the effects of currency translations were discounted.
Revenues from Latin America totaled $741 million, up 6
percent, or 8 percent in constant-currency terms, compared with
the year-ago period.
Total hardware sales were $7.1 billion in the first
quarter, down 8 percent compared with the first quarter of last
year.
The decline in hardware sales mainly reflected weakness in
PCs. In mid-range computer systems, AS/400 revenues increased
and RS/6000 revenues were flat. Revenues from System/390,
IBM's mainframe line, declined as a result of year-over-year
price cuts and ongoing product transitions, while shipments of
System/390 computing power grew about 45 percent, as measured
in MIPS, or millions of instructions per second, the computer
maker said.
Storage product revenues increased, with strength in sales
of hard disk drives sold for installation in the equipment of
other PC makers.
Semiconductor revenues showed strong growth despite the
declines in memory chip prices in the quarter, it said.
Services revenues rose 22 percent to $5.0 billion. IBM
signed services agreements totaling $6.8 billion in the first
quarter, it said.
First-quarter software revenues rose 2 percent to $3.0
billion. IBM shipped 2.7 million Lotus Notes seats, or
individual user software licenses, during the quarter.
Total first-quarter 1998 expenses, which included
acquisition charges and spending to support the Olympics, rose
4 percent.
The average number of shares outstanding in the quarter was
950.2 million compared with 1.0 billion in the first quarter of
1997. There were 942.9 million common shares outstanding at
March 31, 1998, the company said.
Copyright 1998, Reuters News Service |
