Globally diversified IBM
benefited from a weak dollar, and while meeting analysts profit expectations, it missed Wall Street’s revenue target.
The Armonk, N.Y.-based behemoth, which reported its third-quarter earnings Wednesday, saw itself grow as the company’s net profit increased to $1.8 billion, or $1.02 per share, up from $1.3 billion, or 76 cents per share for the same period a year ago.
The company said growth in its services divisions offset losses in its chip businesses. Revenues at Big Blue increased to $21.5 billion for $19.8 billion for the same quarter last year.
IBM said its profits matched what analysts expected driven by robust performance in the company’s services contracts, but IBM’s chip and hardware units did not do as well.
While IBM posted relatively strong financial results, the company’s top executives provided tempered optimism about the future.
“We are beginning to see signs that the economy has stabilized. As we look to 2004, more customers are expected to increase their investments in information technology. While demand is not yet across the board, it is strongest in the areas where we have positioned the company and strengthened our capabilities,” said Sal Palmisano, IBM chairman and CEO.
“Next year, in fact, we see the need for approximately 10,000 new positions in key skill areas, including high-value services, middleware technologies, Linux and open standards-based hardware and software. And we are committing $200 million of our $700 million in training and learning to equip more than 100,000 existing employees with the skills that are highest in demand,” added Palmisano.
“Although it is too early to say that a rebound is at hand, we are confident that we will benefit from both a pick up in IT spending and an economic recovery,” added Palmisano.
IBM services division saw its revenues jump by 17 percent to $10.4 billion, now accounting for nearly half of the company’s total revenues. IBM went onto say that it signed more than $15 billion in services contracts with a variety of clients in the last quarter.
But while services are driving growth, the company’s semiconductor operations are continuing to be a drag on financial results. During the first half of 2003, IBM’s chip manufacturing division lost $122 million, as revenues fell by 24 percent.
On a global basis, IBM had revenues from its operations in the Americas reach $9.4 billion, a 4 percent increase over the same period, a year ago.Meanwhile, revenues from operations in Europe/Middle East/Africa reached $6.8 billion, an increase of 19 percent. The Asia-Pacific region reached $4.8 billion, a revenue increase of 11 percent over a year ago.
There was strong performance in IBM’s Global Services division, which grew to $10.4 billion, an increase of 17 percent. The global services group was assisted by the acquisition last year of PriceWaterhouseCoopers Consulting business for $4 billion.
The company’s hardware division revealed some sluggishness, as revenues decreased by 1 percent to $6.7 billion.
But IBM’s “middleware brands,” which include WebSphere and DB2 product lines, as well as Rational, Tivoli and Lotus products, saw revenues grow by 14 percent to $2.7 billion for the third quarter of 2003.