IBM Earnings Plunge by 32%
Saying companies spent less on technology in the first quarter, IBM Corp. reported its sharpest drop in earnings since the world’s No. 1 computer maker emerged in 1993 from a string of losses.
But the company sounded a positive note for later this year, saying that it expects to meet analysts’ 2002 estimates as revenue from services improves to double-digit growth, which helped boost its shares in after-hours trading to as high as $87.29. The shares had closed off $1.39 at $84.81 on the Big Board before the report was released.
“While no one can predict the timing of a recovery, we remain optimistic that business conditions will improve later this year,” said Chief Executive Sam Palmisano, who took over for longtime IBM head Louis Gerstner on March 1.
IBM posted a profit of $1.19 billion, or 68 cents a share, in the first quarter, down 32% from $1.75 billion, or 98 cents, in the year-earlier period.
Revenue fell 12% to $18.6 billion from $21 billion. Sales in the closely watched services division dropped 3% to $8.2 billion. Hardware revenue fell 25% as results from its large corporate computers and data storage products fell.
The results were in line with the range IBM gave April 8, when it said profit and sales would trail estimates. Based on that warning, analyst expectations were reduced from 85 cents a share on revenue of $19.7 billion to 68 cents on sales of $18.53 billion, according to Thomson Financial/First Call.
IBM shares have been under pressure this year as investors worried about slowing growth in the company’s services division. In addition, its accounting has been scrutinized.
In other earnings reports:
* Propelled by strong microprocessor sales, Advanced Micro Devices Inc. reported a smaller-than-expected first-quarter loss of $9.2 million, or 3 cents a share, contrasted with a profit of $124.8 million, or 37 cents, in the same period a year ago. Revenue was down 24% to $902million, compared with $1.2billion last year. But AMD said it sold 8million PC processors, a record for the quarter.
* Nextel Communications Inc., the nation’s fifth-largest wireless phone service provider, posted a narrower first-quarter operating loss even as a big charge pushed its net loss wider.
Nextel said its net loss widened to $654 million, or 82 cents a share, from a loss of $428million, or 56 cents, a year ago.
This year’s results included a charge of $355million, or 42 cents a share, related to goodwill accounting changes as well as a restructuring charge of $40million, or 5 cents.
Excluding the charges, Nextel’s loss was $279million, or 35 cents a share, compared with analysts’ average estimate of a 40-cent loss. Sales rose to $2.16billion from $1.74billion, but average revenue per customer fell to $68 from $71 a year ago.
* Internet payment service PayPal Inc. reported a first-quarter profit, as revenue more than tripled, in its first earnings report as a public company.
PayPal, which completed an initial public offering this year, also raised its earnings guidance for the second quarter and the rest of the year. The company said it earned $1.2 million, or 2 cents a share, in the latest quarter, contrasted with a loss of $29.3 million, or $5.39, in the year-earlier quarter. Revenue rose to $48.8 million from $14 million.
* Because of brisk demand for its new iMac, Apple Computer Inc. reported fiscal second-quarter profit that beat Wall Street estimates. For the three months ended March 30, the PC maker’s earnings fell 7% to $40million, or 11 cents a share, as revenue rose 4.8% to $1.5billion.
* Conexant Systems Inc.’s fiscal second-quarter loss narrowed as the Newport Beach communications chip maker’s operating expenses declined. Sales fell 4% in the period ended March 29. The loss narrowed to $200.7 million, or 78 cents a share, from $262 million, or $1.08, in the year-earlier quarter. Sales fell to $241 million from $251 million. The loss was the company’s ninth straight.
Broadcom Corp., the world’s largest maker of cable modem chips, said its first-quarter loss narrowed as acquisition-related costs declined. Sales at the Irvine firm fell 23% to $238.8 million from a year earlier. The loss was $166.1 million, or 63 cents a share, compared with $356.9 million, or $1.43, a year earlier.
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Associated Press, Bloomberg News and Reuters were used in compiling this report.
