Profit Off Almost 30% at IBM; Product Delays Cited
International Business Machines Corp., which three weeks ago stunned Wall Street when it projected lower third-quarter profit, disclosed the actual results Monday--earnings for the three months were $877 million, down nearly 30% from a year earlier.
It was the second quarter this year that the profit of the world’s largest computer company was down from the same period in 1988.
Several analysts said they are bracing themselves for even more down quarters. “There could be further disappointments down the road,” said Steven Cohen, an analyst with SoundView Financial in Stamford, Conn.
Revenue for the quarter ended Sept. 30 was $14.3 billion, up 4.3% from a year earlier. For the first nine months of the year, profit was $3.2 billion, down 8%, on revenue that rose 6.5% to $42.2 billion.
As it did three weeks ago, the company blamed the quarter’s performance on delays in new product introductions, a switch by customers to leasing from buying computers and the strength of the U.S. dollar, which reduces the effects of foreign sales.
IBM Chairman John F. Akers said the latest results represented the effects of short-term economic forces and do not foreshadow further problems.
“Demand for IBM products and services continues to be good worldwide,” Akers said in a prepared statement.
However, several Wall Street analysts remained cautious and advised investors not to view IBM as a bargain stock. IBM shares, which closed at $102 after Friday’s stock market free-fall, recovered slightly Monday to close at $103. It was the third most actively traded stock on the New York Stock Exchange.
“I’m not recommending that people ‘bottom fish’ even at these levels,” Cohen said. “The stock is at best dead money. I see no good news in the future, and there’s a potential for bad news.”
Several analysts have complained in recent weeks that IBM’s work force--although smaller than two years ago--remains too bloated for the tough competition it faces in virtually every segment of its computer business.
Further, they say, the industrywide slowdown in mainframe and mid-range computer sales has had particularly harsh results at IBM because it has historically depended on these products for the bulk of its profit.
Finally, they note that IBM is conspicuously absent from two of the fastest growing segments of the computer industry: high-powered desktop workstations and portable laptop models.
