IBM yesterday beat Wall Street expectations for the first quarter of fiscal 2000, posting diluted earnings of 83 US cents per share, compared with earnings per share of 78 cents in the same quarter last year.
The consensus of 24 brokers polled by First Call/Thomson Financial estimated IBM would post earnings per share of 78 cents per share.
Expected healthy quarterly earnings today from IBM and other technology companies helped push the technology-weighted Nasdaq stock exchange further out of its recent decline. The Nasdaq exchange closed yesterday at 3,793, up 7.2 percent. IBM shares closed at $111.5, down 37 cents, or a decline of 0.34 percent. IBM's quarterly report was released after the market closed.
For the first fiscal quarter of 2000, ended March 31, 2000, IBM's net income was $1.52 billion compared with net income of $1.47 billion in the year-ago quarter, the company said in a statement issued today.
However, IBM's first-quarter fiscal 2000 revenue was $19.3 billion, down 5 percent from the $20.3 billion the company recorded a year ago. Part of the revenue slump was due to a drop in IBM disk drive sales, which resulted in a $350 million decline in OEM (original equipment manufacturer) revenue.
Lou Gerstner, IBM's chairman and chief executive officer, described the company's results in a statement as representative of a "transitional quarter." Lockdowns in customers' IT spending due to concerns about the year 2000 (Y2K) problem persisted late into the first quarter of fiscal 2000, Gerstner said.
Investments in B2B (business-to-business) products and services will help IBM increase productivity in the next quarter and through the rest of fiscal year 2000, John Joyce, the company's chief financial officer, said on a teleconference.
"While our revenues declined, profitability improved, yielding better than expected earnings," Joyce said. "Our pipeline of applications is starting to build. We expect double-digit earnings and revenue growth in the second half of the year."
IBM's hardware revenue was $7.7 billion, down 12 percent from the same quarter last year.
IBM Global Services totaled $7.6 billion, essentially the same level as the year-ago quarter. The division's sluggish revenue reflected last year's sale of IBM Global Network to AT&T Corp. and Y2K concerns, according to the company. IBM signed an $8.6 billion services contract in the first quarter of fiscal 2000, while the division's e-business services revenue grew 70 percent.
Software revenues totaled $2.9 billion, flat over the year-ago period. Revenue from IBM's database and Lotus Notes products outpaced operating system revenue. Revenue from WebSphere, the IBM Web application server product, more than doubled over the same quarter last year.
Global financing revenues were reported at $2.9 billion, up 16 percent from the year before period.
Geographically, revenue in the Americas totalled $8.4 billion, down 4 percent from the same quarter last year; Europe, Middle East and Africa (EMEA) revenue was $5.4 billion, down 13 percent; Asia-Pacific revenue was $4 billion, up 15 percent.
OEM revenue declined $1.4 billion, or 19 percent, mostly due to a decline in hard disk-drive revenue compared with the year-ago quarter.
IBM's personal computer revenue fell, although Netfinity server and ThinkPad notebook revenue increased in the quarter, as did revenue in IBM's Web server product line. Microelectronics revenue also increased.
One analyst said IBM will continue to see benefits from its growing B2B applications, as IBM's CFO Joyce predicted.
"They have built up some pretty good momentum," said Lauren Shu, an analyst with Dataquest Inc. She added that IBM's WebSphere e-commerce suite is performing particularly well.