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IBM trounces 1Q forecasts
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April 21, 1999: 5:53 p.m. ET
Big Blue posts $1.5B profit, led by strong growth in software, services
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NEW YORK (CNNfn) - IBM Corp. Wednesday reported first-quarter profits of $1.5 billion, far outstripping Wall Street estimates as the technology giant saw strong growth in its personal computer, software and services businesses.
The Armonk, N.Y.-based company posted a profit of $1.55 a share, as revenue jumped 15 percent to $20.3 billion. Analysts polled by First Call expected IBM (IBM) to report a profit of $1.41 a share.
IBM also outpaced its year-ago results, when it logged earnings of $1 billion, or $1.06 a share, on $17.6 billion in revenue.
Shares of the Dow component rose 2-1/8 to close at 171-7/8 prior to the announcement, then shot up to 187 in after-hours trade on the Instinet trading system.
IBM recently reported that its personal-computer business lost nearly $1 billion last year, touching off a debate on whether the company should accelerate its evolution from a hardware-driven firm to a software- and services-driven company.
This time around, however, IBM posted strong gains in its PC unit. Douglas Maine, the company's chief financial officer, said IBM's PC unit revenues grew 50 percent from last-year's first-quarter levels.
IBM's total hardware revenues grew 17.3 percent to $8.6 billion.
Software, services soar
Louis Gerstner, IBM's chairman and chief executive officer, said services and software produced 60 percent of the company's gross profit during the quarter.
"Services is clearly the largest and fastest-growing portion of the information technology industry, and we continue to extend our leadership position each quarter," Gerstner said. "Our software business continues to gain momentum."
IBM's software unit brought in $2.9 billion in revenue, a 10.4-percent increase from the year-ago period, while global services grew 19.1 percent to $7.6 billion.
"Ten-percent growth in software is a very good number. That's the kind of thing we want to see," said Daniel Kunstler, technology analyst at J.P. Morgan Securities. "That's where [Gerstner is] getting leverage. That's where he's cementing the future of the company."
Kunstler also told CNNfn that IBM is on the right track in its strategy of making e-commerce the centerpiece of all its business units. [271K WAV] or [271K AIFF]
Maine noted that IBM expects to report $10 billion to $15 billion in hardware and software sales over the Internet during 1999, compared with $3.3 billion in 1998.
-- from staff and wire reports
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