IBM Earnings Slump 12.9% in 2nd Quarter

International Business Machines said Monday that earnings for the second quarter fell 12.9% from their year-ago level, in line with recent forecasts by the computer giant.

IBM said net income for the quarter ended June 30 fell to $1.41 billion from $1.62 billion, while revenue rose 2.1% to $11.43 billion. In a statement, IBM Chief Executive John F. Akers blamed the decline on a weakening economy, the strength of the dollar and a slowdown in orders for large-scale computers by customers who are waiting to see IBM’s long-heralded Sierra mainframe.

However, analysts were encouraged that the results did not support recent bleak forecasts of some on Wall Street. And they noted that IBM should be helped by the weakening of the dollar and a decision to move up shipments of the Sierra to September from October.

‘Right on Target’

The quarterly results were “right on target, and for later in the year things are looking somewhat better,” said Ulric Weil, an analyst with Morgan Stanley & Co., an investment banking firm in New York.

The company’s stock rose $1.25 a share to $125.50 on the New York Stock Exchange Monday, with more than 1.5 million shares trading hands.

IBM results have long been a bellwether for the computer industry, but they have been watched even more closely in recent months as a slowdown has engulfed competitors. IBM officials began this year by predicting that a strong second half would make up for weakness in the first six months of 1985.

But in May, Akers jolted Wall Street by backing away from the forecast, saying there would be no “solid” growth this year.

IBM’s latest results offered scant encouragement to such competitors as Digital Equipment and Data General, because IBM said orders for the medium-size machines that are their strongest products remain soft in the U.S. market.

Good Order Rates

Akers said the company has seen “good” order rates for its high-performance data-storage devices and personal computers.

For the first half of 1985, IBM sales rose 2% to $21.2 billion, while earnings fell 15% to $2.4 billion. IBM said that, if currency rates had been the same in the first half of the year as in the first half of 1984, revenue would have grown 8% and earnings would have fallen only 7.1%.

Akers said the “financial health of our business continues to be sound, despite several factors that have adversely affected our earnings in the short term.”

Another victim of the industry slowdown has been Intel Corp., which reported that second-quarter net income was down 80% from the same period last year.

Net income was $9 million for the second quarter ended June 29, down from $55 million for the same period last year.

Intel produces memory and microprocessor components and systems.