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21st Century IBM – belt tightening via the Net

Eats its own cooking

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IBM has hammered critics of its missed sales targets, while predicting more belt-tightening via the Internet.

The PC vendor claims it saved more than $1.5 billion in the first three quarters of this year by selling and buying on line.

It flogged $14.6 billion worth of products over the Web during this period, by which means it says it saved $1.4 billion. It also bought $28 billion of parts and supplies via e-commerce, pocketing an extra $247 million compared to buying through traditional methods.

Rather than posting revenue increases, an issue IBM chairman Lou Gerstner accused some analysts of being "fixated on," IBM missed sales forecasts by $1 billion for Q3. The company is banking on future profits stemming from cost cuts to be provided by use of the Internet, according to a Bloomberg report.

"We saved billions and billions of dollars over the last several years through our e-procurement efforts," said Gerstner. "We will continue to drive this and leverage our cost and expense base."

IBM shares dipped 15 per cent when the company failed to meet Wall Street revenue estimates for the third quarter ended October 18, recording $21.78 billion in sales. But earnings per share met expectations at $1.08, something IBM put down to the Net.

"We have been practicing what we sell: e-business," said IBM spokesman John Bukovinsky. "We're eating our own cooking; and despite the slower-than-expected revenue growth this year, we've managed to meet or beat Wall Street earnings projections."

Meanwhile, IBM may have to dig further into its shrinking reserves if two French outfits get their way. Electricite de France and Gaz de France today confirmed they are suing the vendor over a computer system installation cock-up. EDF said IBM's delay in putting in the system would cost the French company more than 1 billion French Francs ($129 million). ®

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