IBM Isn’t Feeling So Blue Anymore; Net Income Rises Sharply
Long-suffering Big Blue is suddenly looking a little rosier.
International Business Machines Corp. on Thursday topped Wall Street expectations with a third-quarter net income of $689 million, contrasted with an $87-million loss in the same period a year ago. Revenue rose 8.6% to $15.43 billion.
The turnaround resulted from lower costs, largely the result of extensive staff cuts, and strong worldwide sales. But the Armonk, N.Y., computer giant acknowledged that mainframe and other computer prices continue to be under pressure and said its overall gross margins are expected to stay flat through 1995.
Meanwhile, though IBM’s struggling personal computer division is enjoying good growth in revenue outside this country, U.S. sales are still sluggish--a situation that won’t be helped in the near term by IBM’s gross underestimation of demand for its new Aptiva line of PCs.
IBM’s per-share earnings of $1.18 wowed many analysts, who had projected about 92 cents a share.
“Everyone is extremely pleased with the way earnings are evolving,” said John B. Jones Jr., an analyst in the San Francisco office of Salomon Bros. Investors, on the other hand, were less impressed. IBM stock sank 50 cents a share to $74.875 on the New York Stock Exchange.
