IBM Loses $285 Million in 1st Quarter, but Stock Rises
International Business Machines Corp. on Tuesday reported a $285-million loss for the first quarter on a steep 7% drop in revenue.
The company has suffered from a severe decline in its core mainframe computer business, which sank about 30% from a year earlier, and was also hurt by the slumping economy in Europe. The results were in line with analysts’ expectations, however, and IBM shares gained $1.375, to $50.625, in heavy New York Stock Exchange trading.
IBM’s new chairman, Louis Gerstner Jr., installed last month as the first outside chief of the world’s largest computer maker after it posted record losses last year, offered a mixed outlook for the company.
“These results reflect weak demand and continued competitive pressures in many of our hardware product lines, particularly mainframe computers and large disk drives,” Gerstner said.
But he added that demand for the company’s personal computers, workstations and service businesses remains strong.
The quarterly loss was IBM’s third in a row and fifth in the last nine periods. Unlike previous declines, however, this one came solely from operations rather then special charges.
The loss amounted to 50 cents a share, contrasted with first-quarter 1992 profit of $642 million, or $1.12 a share, before an income tax-related accounting change that boosted net income by $1.9 billion. Revenue fell to $13.1 billion from $14 billion, the lowest since the $12.7 billion for the first three months of 1989.
IBM took more than $11 billion in accounting charges last year to pay for 1992 and ’93 restructurings. The charges were largely to blame for an annual loss of nearly $5 billion, but operations also suffered, and IBM posted its first-ever operating loss in the fourth quarter.
But the cuts appear to be curbing expenses. IBM, based in Armonk, N.Y., said sales, general and administrative expenses fell 10.1% in the first quarter, while total operating expenses dropped 8.9%.
“There’s clearly progress being made, but they’re a long way from bailing themselves out from the tough environment they’re in,” said John Jones Jr., a Salomon Bros. analyst.
On Monday, Gerstner meets face-to-face with investors, who have seen IBM’s stock plummet from above $100 in the last year, at the company’s annual meeting in Tampa, Fla.
Gerstner so far has kept a low profile. He has refused almost all requests for interviews and has concentrated on learning IBM’s businesses.
“This is not an organization that can stand too many more months of paralysis,” said Charles Ferguson, a computer industry consultant and co-author of a book on IBM.
