Earlie,
Check carefully, old boy.<g> Those numbers appear excellent at first blush, especially the enterprise solutions numbers.
IBM 1st-Qtr Profit Rises 42% on Services, Computers (Update4) (Adds analyst's comment, PC revenue, RS/6000 performance.)
Armonk, New York, April 21 (Bloomberg) -- International Business Machines Corp., the world's biggest computer maker, said first-quarter profit rose a better-than-expected 42 percent on revenue from its services business and increased computer sales. IBM shares jumped 10 percent.
Net income rose to $1.47 billion, or $1.55 a share, from $1.04 billion, or $1.06, in the year-earlier period. IBM was expected to earn $1.41 a share, the average estimate of analysts from First Call Corp. Revenue rose 15 percent to $20.32 billion, topping forecasts for about $19.2 billion.
IBM benefited from new contracts in its business of installing and running corporate computers and about a 50 percent surge in personal computer sales to $3.6 billion. Total computer revenue rose 17 percent, and the progress IBM made in most businesses may spark optimism among investors for computer- related companies. ''It's a blowout quarter. Hardware was especially strong,'' said Megan Graham-Hackett, an analyst at Standard & Poor's Equity Group, who rates IBM a ''buy.''
IBM, based in Armonk, New York, rose 2 1/8 to 171 7/8 before the earnings report. Instinet traded IBM at 189, up 17 1/8, after the release.
Shares of Dell Computer Corp., the No. 1 PC direct seller; Intel Corp., the world's biggest computer-chip maker; and Microsoft Corp., the No. 1 software company, rose after the report.
Still, Chief Financial Officer Douglas Maine said analysts shouldn't change profit estimates for the full year. IBM is expected to earn $7.52 a share in 1999, according to First Call.
While concerns about the Year 2000 computer glitch, which some other technology companies have said will hurt sales later this year, didn't affect results in the first quarter, Maine said the situation was unclear for the rest of the year. ''The picture is really mixed,'' he said.
Compaq
IBM's performance compares with a disappointing quarter for rival Compaq Computer Corp., the world's No. 3 computer company and biggest PC maker. Compaq today reported profit of 16 cents a share, about half of what analysts expected before the company's warning on April 9.
IBM's first-quarter performance ''is further proof that the issues facing Compaq are related to Compaq,'' said Andrew Neff, an analyst at Bear, Stearns who rates IBM a ''buy.''
Compaq is grappling with slower-than-expected PC and server sales as it struggles to speed up its distribution to corporate customers. IBM already is well on its way to working out distribution kinks.
Unlike IBM, Compaq ''seems to be caught between a rock and a hard place,'' said Bob Sitko, a portfolio manager for Cullen/Frost Bankers Inc. in San Antonio, which owns about 750,000 Compaq shares.
IBM's services business was especially strong.
Revenue rose a better-than-expected 24 percent. IBM signed $9.8 billion in services contracts during the quarter and ended with a backlog of about $55 billion in contracts. ''Services have been doing well pretty much across the board,'' said Bill Milton, an analyst at Brown Brothers Harriman, who rates IBM a ''buy.''
Improvements
Sales of IBM's software rose 10 percent to $2.9 billion. During the quarter, IBM passed Oracle Corp. as the biggest maker of database software.
Software and services produced 60 percent of the company's gross profit during the quarter.
The company said its business in Asia improved, and revenue growth was 10 percent or more in Europe and the Americas.
Gross profit margin, or the percentage of sales left after subtracting production costs, narrowed to 35.7 percent from 36.6 percent.
Revenue from the RS/6000, IBM's large server computers that run corporate networks, declined. While overseas sales showed some improvement, ''we need more focus in North America,'' CFO Maine said on a conference call with analysts.
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