IBM Beats Tech Slump With 28% Profit Gain
Providing a stark contrast to the slumping tech sector, IBM bested Wall Street expectations Wednesday with a 28% jump in fourth-quarter profit and gave an optimistic sales forecast for 2001.
The Armonk, N.Y., company said its profit for the last three months of 2000 climbed to $2.67 billion as revenue rose 6% to $25.6 billion. Big Blue’s earnings per share of $1.48 narrowly edged the $1.46-per-share profit expected by Wall Street analysts, according to a survey by First Call/Thomson Financial.
IBM said the company benefited from its technology outsourcing services, plus strong sales of new mainframes and Web servers designed for e-business customers.
Unlike other technology bellwethers, IBM also stuck by its sales forecasts for 2001. IBM Chief Financial Officer John Joyce said he was comfortable with Wall Street’s projections that IBM’s revenue growth will be “in the high single digits.”
“IBM’s broad portfolio should position us well relative to our competitors,” IBM Chairman and Chief Executive Louis Gerstner said.
IBM’s diverse line of businesses may have insulated it from the slowdown in personal computer sales, but analysts said the picture for the rest of the industry looks bleak until mid-2001.
“From IBM, you can’t read too much into that for the rest of the industry,” said Tim Bajarin, chief analyst at Creative Strategies. “Barring any true recession, PC sales stay flat through the first two quarters.”
IBM’s stock rose $3.94 to $96.69 in regular trading on the New York Stock Exchange, then surged to $102 in after-hours trading, following the earnings report.
Even in a slowdown, companies are willing to pay for products and services that solve critical business problems, IBM’s Joyce said. “The [information technology] industry, especially e-business, is well-suited to weather a business downturn,” he said. “This technology provides our customers with tremendous productivity [when] customers are . . . looking to become more and more productive.”
Although sales of IBM’s desktop PCs fell 4% during the quarter, sales of computer servers and mainframes for e-business more than made up the difference.
Earlier this month chip giant Intel, Web portal Yahoo and PC maker Hewlett-Packard all lowered expectations for this year because of the slowing U.S. economy.
But Joyce said IBM is in good shape for 2001 and noted that Big Blue’s customers in Europe and Asia could be “an important counterbalance” to the slowing American economy.
Meanwhile, chip maker Advanced Micro Devices said Wednesday that its fourth-quarter profit nearly tripled as it gained three points of market share against longtime rival Intel.
The Sunnyvale company had sales of nearly $1.2 billion in the last three months of 2000, up 24% from $967 million in 1999.
AMD’s quarterly net income of $178 million, or 53 cents per share, was nearly triple its 1999 profit but below the 55 cents per share that analysts had expected, according to First Call/Thomson Financial.
Before the earnings announcement, AMD shares rose $1.38 to close at $18.50 on the New York Stock Exchange.
Also on Wednesday, Apple Computer reported its first quarterly loss in three years but said the company would return to profitability this spring.
Apple, the Cupertino, Calif.-based maker of colorful iMac desktop computers, lost $195 million, or 58 cents per share, in its fiscal first quarter; Apple’s revenue fell 57% to $1 billion.
The company’s loss from operations was $247 million, or 73 cents per share. Analysts expected Apple to lose 65 cents per share, according to First Call/Thomson Financial.
In Nasdaq trading, Apple shares fell 31 cents to close at $16.81 before the earnings release, then rose to $17.56 in after-hours trading.
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IBM’s Bounce
IBM shares jumped in after-hours trading Wednesday following the company’s strong earnings report, continuing the stock’s rebound.
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IBM shares, monthly closes and latest
Wednesday after-hours trading: $102
Source: Bloomberg News
