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IBM Announces Record First Quarter Results


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ARMONK, N.Y - 21 Apr 1999: . . . IBM today announced first-quarter 1999 diluted earnings per common share of $1.55 compared with diluted earnings per common share of $1.06 in the first quarter of 1998. First-quarter 1999 net income totaled $1.5 billion compared with $1.0 billion in the first quarter of last year. First-quarter 1999 revenues grew 15 percent (14 percent at constant currency) to $20.3 billion. IBM's earnings-per-share, net income and revenue results were all first-quarter records for the company.

Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said: "We started 1999 with a strong quarter. We saw a significant improvement in our business in Asia, and we also had double-digit revenue growth in Europe and the Americas. Our operating results were excellent, led by services and software -- which together produced 60 percent of our gross profits this quarter. Our Technology Group results were mixed, with growth in hard disk drives offset by continued weakness in memory chips. Our PC unit also had substantially improved results.

"What's more exciting, however, is that this quarter's performance is a direct reflection of the power of the strategies we have put in place over the last few years," Mr. Gerstner said. "Services is clearly the largest and fastest-growing portion of the information technology industry, and we continue to extend our leadership position each quarter. Our software business continues to gain momentum. For example, we are now the number one database company in the world. Our strategy of providing leading-edge technology to the marketplace received substantial impetus this quarter as a result of major, long-term agreements we announced with Dell and EMC. And finally, our strategy to reposition the System/390 continued to move forward, with an increase of more than 80 percent in MIPS shipments in the first quarter."

In as-reported terms, excluding revenues from the company's original equipment manufacturer (OEM) business, first-quarter revenues from the Americas totaled $8.8 billion, an increase of 13 percent (14 percent in constant currency) compared with the first quarter of 1998. Revenues from Europe/Middle East/Africa were $6.3 billion, up 20 percent (18 percent in constant currency). Revenues from Asia-Pacific increased 20 percent (13 percent in constant currency) to $3.5 billion. OEM revenues totaled $1.8 billion in the first quarter of 1999, a 5 percent increase (5 percent in constant currency) compared with the year-earlier period.

Total hardware revenues were $8.6 billion in the first quarter, an increase of 17 percent (16 percent in constant currency) from the first quarter of last year. Revenues from personal systems increased significantly. Within servers, System/390 revenues increased while RS/6000 and AS/400 revenues declined. Within technology, storage revenues increased and microelectronics revenues declined.

Revenues from IBM Global Services, including maintenance, grew 19 percent (18 percent in constant currency) in the first quarter to $7.6 billion. Excluding maintenance, services revenues increased 24 percent (23 percent at constant currency) to $6.3 billion. IBM signed $9.8 billion in services contracts in the first quarter and concluded the quarter with a total services contract backlog of approximately $55 billion.

Software revenues increased 10 percent (9 percent in constant currency) in the first quarter to $2.9 billion, with strong results from the company's database, Lotus Notes and transaction processing products.

Revenues from Global Financing declined 2 percent in the first quarter to $705 million.

Revenues from the Enterprise Investments/Other area, which includes custom applications and other products designed to meet specialized customer requirements, decreased 6 percent (8 percent at constant currency) year over year to $558 million.

IBM's overall gross profit margin was 35.7 percent in the first quarter compared with 36.6 percent in the first quarter of last year.

The company's expense-to-revenue ratio improved 2.6 points year over year to 25.4 percent.

IBM's tax rate in the first quarter was 30.0 percent compared with 32.0 percent in the year-earlier period.

IBM spent approximately $2.1 billion on share repurchases in the first quarter. The average number of shares outstanding in the quarter was 911.9 million compared with 950.2 million in the first quarter of 1998. There were 907.4 million common shares outstanding at March 31, 1999.

Debt in support of operations, excluding global financing, increased $1.1 billion from year-end 1998 to $2.8 billion. Global financing debt decreased $559 million from the end of 1998 to a total of $27.2 billion.

Forward-looking and cautionary statements
Except for the historical information and discussions contained herein, statements included in this release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, as discussed in the company's filings with the Securities and Exchange Commission.

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