IBM’s Profit Rises in 3rd Quarter, But Slow Sales Miss Expectations

IBM Corp. on Tuesday reported a third-quarter profit in line with expectations, and said sales growth missed forecasts because it couldn’t meet demand for software and some of its servers.

IBM, the world’s largest computer maker, said earnings grew 18% to $2 billion, or $1.08 a share, from $1.7 billion, or 90 cents, meeting the analysts’ consensus estimate as compiled by First Call/ Thomson Financial.

Sales rose 3% to $21.8 billion, below analysts’ forecasts of $22.4 billion.

Big Blue said that sales were held back by several factors.

“Demand for our microelectronics products . . . far outstripped our ability to supply components,” Chief Executive Louis Gerstner said. “Second, the upcoming release of our new high-end server slowed demand for our System 390 family of servers. Finally, parts of our software business slowed unexpectedly in September.”

A weak euro against the dollar also hurt revenue, IBM said.

Sales had declined in the previous three quarters because companies delayed server and services spending amid year 2000 concerns and because of losses in personal-computer sales.

“While the rate of growth for revenue continued to improve in the third quarter, it was not at a pace that we wanted,” IBM Chief Financial Officer John Joyce said in a conference call.

Joyce declined to specify what kind of sales growth IBM could see in the fourth quarter, only saying that sales would be stronger than in the third quarter. This was a step back from earlier guidance of at least 10% revenue growth, analysts said.

Joyce said the company is “driving to achieve consensus earnings per share in the fourth quarter--just as we did in the third quarter.”

Shares in Armonk, N.Y.-based IBM fell 8% to $103.75 in after-hours trading from a closing price of $113 in regular New York Stock Exchange trading, where it rose $1.88.

“The top line is a little light, and unless they can rationalize why it is light the tone will more than likely be negative,” Salomon Smith Barney analyst John Jones said.

Software revenue fell 3% to $2.9 billion. Hardware sales were up 4% to $9.5 billion, while Global Services revenue was also up 4% to $8.2 billion.

At a Glance

Other earnings, excluding one-time gains or charges unless noted, include:

* Cypress Semiconductor Corp. said third-quarter profit rose 40% to $110.5 million, or 70 cents a share, on an 83% jump in sales to $356.2 million. The earnings beat analyst expectations of 62 cents, but shares of the semiconductor maker fell $2.25, or 6%, to close at $34.44 in Big Board trading on concern that growth of sales and profit may slow.

* Handspring Inc. said its fiscal first-quarter loss narrowed to $8 million, or 8 cents a share, from $5.9 million, or 13 cents a year ago, on accelerated sales of its electronic organizers. Handspring, which shipped its first products about a year ago, posted sales of $70.5 million, a 36% rise from the previous quarter. Handspring also said it plans to start selling organizers through Target Corp.’s retail stores, adding to retailers such as Best Buy Co. and CompUSA Inc.

* Incyte Genomics Inc., which develops genetic information databases used by drug and biotechnology companies, said its third-quarter loss narrowed to $7.6 million, or 12 cents a share, from $11.1 million, or 20 cents, a year ago, in line with forecasts. Revenue was up 47% to $52 million.

* Interwoven Inc., whose software helps companies manage content among multiple Web sites, reported third-quarter net income of $548,000, or 1 cent a share, better than the 2-cent loss analysts expected. In the year-ago quarter, the company had a loss of $3.5 million, or 10 cents a share. Sales soared to $39.4 million from $4.3 million, beating analyst estimates. Interwoven also declared a 2-for-1 stock split.

* Mercury Interactive Corp., said third-quarter net income more than doubled to $16.7 million, or 18 cents, from $8.1 million, or 9 cents, a year ago, as the software maker introduced products to help monitor and improve the performance of business Web sites. The results exceeded analyst estimates of 16 cents. Revenue rose 67% to $79.5 million.

* Parametric Technology Corp., a maker of software for manufacturing companies, said earnings fell 84% in its fiscal fourth quarter to $6.91 million, or 3 cents a share, but beat expectations of 2 cents. Revenue declined 16% to $235 million.

* PeopleSoft Inc., which makes business software for managing human resources and customer relations, reported a profit of $51.2 million, or 23 cents a share, well beyond the 7 cents analysts expected. The company had posted a loss of $443,000, or break-even on a per-share basis, a year ago. Revenue rose 16% to $420.2 million as software license revenue nearly doubled. PeopleSoft also said its board approved a plan to buy back up to $100 million of the company’s stock.

* RealNetworks Inc., maker of the most popular Internet media player software, said its third-quarter profit rose 54% to $7.63 million, or 4 cents, from $4.94 million, matching analyst expectations. Revenue jumped 92% to $67.1 million, with strength in advertising and software sales.

* Sybase Inc. reported a 40% jump to third-quarter earnings to $26.7 million, or 30 cents a share, well beyond expectations of 5 cents. Revenue was up 11% to $239.1 million.

* Tellabs Inc., the biggest maker of equipment to manage traffic on telephone lines, said third-quarter profit rose 42% to $196 million, or 47 cents a share, 2 cents better than forecasts. Sales jumped 46% to $870.6 million.

* Teradyne Inc., the world’s biggest maker of semiconductor-testing equipment, said third-quarter profit more than doubled as analysts expected, but said that fourth-quarter results will miss expectations. Earnings in the latest quarter rose to $153.5 million, or 84 cents a share, from $62.7 million, or 35 cents, a year ago, on a 71% rise in sales to $848 million. Teradyne said profit in the fourth quarter will be about 66 cents or 67 cents a share, contrasted with the 91 cents analysts forecast, because of slower sales. Teradyne’s shares fell $9.44, or 27%, to close at $25 on the NYSE.

* Xilinx Inc., maker of programmable logic chips, said fiscal second-quarter profit climbed 104% to $114.1 million, or 32 cents a share, 2 cents better than forecasts, as sales of communication chips soared. Revenue jumped 83% to $437.4 million.