IBM scrambles to makes its numbers

By Steve Malone

Posted on 18 Jul 2002 at 09:55

IBM, the bellwether stock for the world's tech industry managed to scrape into profit last quarter - just.

The company made $56 million on sales of $20 billion with a $1.4 billion charge to cover job losses and retreating from loss making businesses. Even so, Big Blue was in the black mainly because of the sale of the Hard Disk Division to Hitachi which brought in $379 million.

Overall revenues were seven per cent down on the same quarter in 2001 leading to a 97% drop in earnings.

In a statement the company said, 'Personal computer revenues declined year over year. Revenues from Microelectronics decreased from a year ago, reflecting the ongoing weakness in demand for semiconductor products.

'Software revenues increased eight per cent (seven per cent in constant currency) to $3.3 billion compared to the prior year's second quarter. Middleware products, which include WebSphere and DB2 and which comprise 80 percent of IBM's software revenues, grew 10 per cent at constant currency in the second quarter. WebSphere, IBM's leading e-business middleware product, grew 17 per cent from a year ago. IBM's leading database management software, DB2, grew 11 per cent, helped in part by the acquisition of Informix. Revenues from Tivoli continued to rebound year over year. Operating systems revenues declined.'

Reaction in the industry is that IBM has managed to hold the line in a tough marketplace againgst fierce competition from the likes of Hewlett-Packard (which now includes Compaq Computer) and Sun. IBM shares roses slightly on after-hours trading on Wall Street as investors breathed a sigh of relief that the company didn't reveal any nasty surprises in its figures.

Samuel J. Palmisano, IBM president and chief executive officer, said: 'I'm proud that the IBM team generated $20 billion in revenues in the second quarter - one of the most difficult capital spending environments we've seen in decades. Our performance, even in this difficult market, reaffirms the strength of our portfolio and that our strategies are on target. At the same time, we took aggressive actions in the quarter that will strengthen IBM for long-term industry leadership and further improve our cost and expense structure. These actions will immediately strengthen our overall results.