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Original URL: http://www.theregister.co.uk/2004/04/16/ibm_q104_results/

Servers carry IBM to solid Q1

A little currency love too

By Ashlee Vance in Sydney (ashlee.vance@theregister.co.uk)

Posted in Financial News, 16th April 2004 02:20 GMT

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A solid performance from IBM's server unit helped carry the company to a decent first quarter.

IBM reported $22.2bn in total revenue for the quarter, which stands as an 11 per cent increase over the $20.1bn posted a year ago. Net income also increased to $1.6bn up from $1.4bn.

"IBM continued to out-perform the industry in our selected segments and gained share," said Sam Palmisano, CEO at IBM. "We continued our industry-leading work in services with more than $10bn in signings after a very strong fourth quarter of signings, and we grew our software and systems businesses, with significant progress in zSeries (mainframe) servers and WebSphere middleware. We delivered double-digit growth in emerging markets such as China, Eastern Europe, India and Brazil. Our balance sheet remains strong, with $8.5bn of cash on hand."

As has been the case of late, IBM's results were boosted favorable currency conditions. For example, the 11 per cent total revenue gain drops to 3 per cent in constant currency. IBM's hardware business was the only major group to post double-digit gains in constant currency.

The first quarter success of the hardware team should come as no surprise. IBM has been steadily gaining share against competitors in both the Intel/AMD and Unix markets.

In Q1, IBM's hardware revenue rose 16 per cent (10 per cent in constant currency) to $6.7bn. A 100 percent increase in mainframe "computing power" was a major driver for this business. Since last year's Q1, IBM has rolled out several new mainframe systems. Intel/AMD and Unix server revenues were up as well.

IBM's software business pumped out $3.5bn in sales - an 11 per cent year-over-year increase (3 per cent with currency adjustments). The PC division increased revenue 18 per cent to $2.8bn. On the down side, IBM's financing operations saw revenue drop 6 per cent to $662m.

IBM's oft talked about global services group managed to increase revenue 9 per cent to $11bn from $10.2bn last year.

While IBM said its growth was ahead of competitors, recent results do not really back up the claims. IBM's microelectronics business, for example, had a $154m loss in the quarter - much higher than the $11m loss in the year earlier period. Intel [1] and AMD [2], by contrast, posted solid results.

In hardware, IBM faired only okay. Storage-heavy EMC posted much stronger [3] overall growth, and Dell recently upped [4] an already optimistic forecast.

IBM's only real whipping boy was Sun [5].

All in all, however, it's hard to compare more specialized companies against IBM. The best head-to-head mark will come when HP reports its results. ®

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Offshore analysts speak with forked tongue [7]
IBM buys disaster recovery biz [8]