IBM Posts Profit on Cost Cuts, Closures

IBM Corp. said Monday that quarterly earnings rose for the first time in almost two years, helped by cost cuts and the closure of some old chip-making facilities.

The world’s biggest computer company also backed Wall Street revenue and profit forecasts for 2003.

Armonk, N.Y.-based IBM, which sells everything from computer services to giant mainframes to software, earned $1.38 billion, or 79 cents a share, in the first quarter, up 16% from $1.19 billion, or 68 cents a share, in the same quarter last year.

Analysts surveyed by Thomson First Call had on average expected earnings of 80 cents a share for the latest quarter.

Revenue rose to $20.1 billion from $18 billion a year ago.

IBM, like many technology companies, cut about 15,000 jobs last year and closed down some older chip-making facilities as it faced an extended downturn in corporate spending.

Samuel Palmisano, IBM chairman and chief executive, said the company was weathering the “difficult environment” well. “We delivered another strong quarter and continued to gain share across our strategic businesses,” he said in a statement.

“A bellwether like IBM has kind of cleared the hurdle as far as quarterly earnings are concerned,” said Sunil Reddy, portfolio manager of the Fifth Third Technology Fund, which holds IBM shares. “They had a 1-cent miss on the bottom line, but I think that’s probably a non-factor.”

On a conference call to discuss the results, IBM Chief Financial Officer John Joyce told analysts he was comfortable with Wall Street estimates, as polled by research firm Multex, for 2003 revenue of $88.04 billion and full-year earnings per share of $4.32.

The company said services revenue rose to $10.2 billion, helped by its acquisition of PricewaterhouseCoopers Consulting. IBM said that it signed more than $12 billion in new services contracts during the quarter.

Computer hardware revenue fell slightly to $5.81 billion from $5.88 billion a year ago. The company said sales of its mainframe computers fell during the quarter as customers waited for the launch of its new system this year.

Software revenue rose 8% to $3.1 billion from $2.9 billion, aided by strong sales of its WebSphere middleware software, IBM said.

IBM shares rose $1.32 to close at $80.07 on the New York Stock Exchange before the earnings announcement. Shares rose as high as $81.45 after hours.