Big blue posts big profits

16 Apr 2004

IBM has posted first quarter earnings of US$1.6bn, or 93 cents per share, meeting Wall Street expectations. However, analysts warn that much of the company’s quarterly 11pc revenue gain was due to a weak dollar exchange rate.

Revenue rose to US$22.3bn from $20.1bn in the previous year. IBM’s 11pc increase in quarterly revenue included a 15pc gain in sales to small and medium-sized businesses, which has been a closer focus of late.

However, the overall revenue rise would have amounted to just 3pc without currency fluctuations. Weakness in the US currency inflates the dollar value of sales in other currencies.

IBM’s services division, which accounts for half of the company’s sales, showed a 9pc gain in revenue, though the increase would have been only 1pc without currency fluctuations. IBM said the unit booked US$10bn in new contracts in the quarter.

IBM also announced that it would share chip designs and collaborate more with outside developers in hopes of getting its semiconductors into wider use.

Combined, the systems and technology group showed an operating profit of US$170m in the first quarter.

Sam Palmisano, IBM’s chairman and chief executive officer, said: “The IBM team entered the first quarter with good momentum and delivered a solid first quarter. Behind the results, clients are increasingly turning to IBM to help them become on demand businesses. This is creating demand for integrated services and high-performance IT infrastructure based on open industry standards – areas where we have chosen to lead.

“IBM continued to out-perform the industry in our selected segments and gained share. We continued our industry-leading work in services with more than US$10bn in signings after a very strong fourth quarter of signings, and we grew our software and systems businesses, with significant progress in zSeries servers and WebSphere middleware. We delivered double-digit growth in emerging markets such as China, Eastern Europe, India and Brazil. Our balance sheet remains strong, with US$8.5bn of cash on hand.

“Despite the strengthening economic recovery, many of our competitors continue to struggle with the fundamental, changing dynamics of the IT industry. Because we anticipated these changes – in computing and in how enterprises apply technology – we made significant investments and repositioned IBM during the downturn. Those strategic moves are beginning to pay off for our clients and shareholders. We remain enthusiastic about our prospects for 2004”, Palmisano said.

By John Kennedy