IBM Announces First-Quarter 2000 Results

Select a topic or year

ARMONK, N.Y - 18 Apr 2000: -- IBM today announced first-quarter 2000 diluted earnings per common share of $.83 compared with diluted earnings per common share of $.78 in the first quarter of last year. First-quarter 2000 net income was $1.52 billion compared with net income of $1.47 billion in the first quarter of 1999. IBM's first-quarter 2000 revenues totaled $19.3 billion, a decline of 5 percent (3 percent at constant currency) compared with the year-earlier period.

Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said: "This was a transitional quarter, as we expected, with Y2K lockdowns continuing until late in the quarter in many of our large enterprise accounts. In addition, a series of previously announced actions -- which are improving our business structure over the long term -- hurt our revenues in the first quarter. Nevertheless, we had good earnings per share, improving results in our server business, and strong performance in such growth areas as e-business services, database and Web application software, and custom chips.

"We believe that IBM is uniquely positioned to benefit from the many changes that are occurring in our industry. Our significant investments in e-business are beginning to pay off in exciting new growth prospects for us. In the first quarter, for example, we made several major announcements in B2B commerce, Web hosting and wireless technologies. We're pleased that we've been able to deliver solid earnings performance during a time of substantial transition in IBM's business portfolio. Looking forward, we continue to believe that 2000 will be a good year for IBM," Mr. Gerstner said.

In the Americas, first-quarter revenues totaled $8.4 billion, down 4 percent (4 percent at constant currency) from the same period of 1999. Revenues from Europe/Middle East/Africa were $5.4 billion, down 13 percent (4 percent at constant currency). Asia-Pacific revenues increased 15 percent (8 percent at constant currency) to $4.0 billion. OEM revenues declined 19 percent to $1.4 billion, primarily due to a year-over-year decline in hard disk drive revenues.

Hardware revenues totaled $7.7 billion in the first quarter, a decrease of 12 percent (11 percent at constant currency) compared with the year-earlier period. Personal computer revenues fell, as the company continued to take actions to improve long-term profitability in this area. These steps included bringing dealer inventories to record low levels while reducing low-profitability special bid activity. Despite the overall decline in personal computer revenues, Netfinity server and ThinkPad revenues increased in the quarter. Revenues also grew in IBM's Web server product line, which includes the RS/6000 and NUMA-Q products, with particularly strong demand for the advanced RS/6000 S80 model. AS/400 revenues increased year over year, led by growth in mid-range and high-end models. System/390 revenues declined, although in the first quarter customers absorbed most of their remaining excess Y2K test capacity. Microelectronics revenues increased, with continued significant acceleration in shipments of custom logic chips. Total storage revenues declined, principally due to unanticipated weakness in the company's hard disk drive product line.

Revenues from IBM Global Services were adversely affected by two transitional events: the sale of the IBM Global Network last year to AT&T and a sharp year-over-year decline in Y2K services activity. After adjusting for these factors, Global Services revenues (excluding maintenance) increased 9 percent (10 percent at constant currency) compared with the same period of last year. On an as-reported basis, revenues from Global Services totaled $7.6 billion, flat year over year (up 1 percent at constant currency). IBM signed $8.6 billion in services contracts in the quarter, and e-business services revenues grew 70 percent.

Software revenues totaled $2.9 billion, flat year over year (up 3 percent at constant currency). Revenues grew strongly in the company's database and Lotus Notes product lines, while operating system revenues declined. Revenues from WebSphere, the company's leading Web application server product, more than doubled year over year.

Global Financing revenues increased 16 percent (17 percent at constant currency) in the first quarter to $816 million.

Revenues from the Enterprise Investments/Other category, which comprises customized hardware and software products for specialized customer uses, declined 13 percent (10 percent at constant currency) to $341 million.

IBM's total gross profit margin was 36.2 percent in the first quarter compared with 35.7 percent in the first quarter a year ago.

Total first-quarter expenses declined 6 percent, and the company improved its expense-to-revenue ratio by 0.4 points year over year to 25.0 percent.

IBM spent approximately $2.1 billion on common share repurchases in the first quarter. The average number of basic common shares outstanding in the quarter was 1.78 billion compared with 1.82 billion in the same period of last year. There were 1.77 billion basic common shares outstanding at March 31, 2000.

The company's debt in support of operations, excluding global financing, increased $618 million from year-end 1999 to $2.2 billion, with a debt-to-capitalization ratio of 13 percent. Global financing debt decreased $834 million from year-end 1999 to $26.0 billion, resulting in a debt-to-equity ratio of 5.2 to 1.

Effective in the first quarter, results reflect changes the company made in the organization of its business segments, including the transfer of the system-level product business from the Technology segment to the Enterprise Systems group and the transfer of point-of-sale terminals from Enterprise Investments to the Personal Systems Group. Also reflected are changes the company made in its expense allocation methodology, allocating expense items previously unallocated and enhancing shared expense allocation. First-quarter 1999 results have been reclassified to conform with the 2000 presentation.

Forward-looking and cautionary statements

Except for the historical information and discussions contained herein, statements contained 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.

Financial Results

# # #

Related XML feeds
Topics XML feeds
Financial news, company earnings, philanthropy, community service, human resources, sponsorship