IBM Corp edged out Wall Street estimates, posting first-quarter net income of $1.04bn, or $1.06 per share, when analysts surveyed by First Call were expecting $1.05. Net income was down 13.3% from the year-ago quarter’s $1.195bn. Revenue increased 1.8% to $17.62bn, and Big Blue says in constant currency the increase would have been 6%. Earnings were hurt by expenses which, including acquisition charges and spending to support the Olympics, increased 4%. Currency and weakness in Asia also had adverse effects on the bottom line, as well as pricing pressures in the PC business. The PC problems were slightly offset by strength in the services, software, mid-range servers and OEM businesses. Gross profit margin was 36.6% first quarter, compared with 38.1 percent a year ago, with improvement in services and software offset by declines in hardware and rentals and financing margins. Total hardware sales were down 8% at $7.1bn. The decline was due mostly to weak PC sales. AS/400 revenue increased and RS/6000 revenue was flat. System/390 revenues declined as a result of price reductions and ongoing product transitions. Storage product revenue increased, with continued strength in OEM sales of hard disk drives. Semiconductor revenues grew despite the declines in memory chip prices in the quarter. Services revenue rose 22% to $5.0bn and service agreements signed during the quarter totaled $6.8bn. Gross margins in services improved by 1.6 points year over year to 21.1%. Software revenue increased 2% to $3.0bn, with shipments of 2.7 million Lotus Notes seats during the quarter. Maintenance revenues fell 8% to $1.5bn, while revenues from rentals and financing increased 11% to nearly $1.0bn. Revenue from North America totaled $8.3bn, up 4% year- over-year. Revenue from Europe/Middle East/Africa increased 2% to $5.4bn. Asia-Pacific revenue was $3.2bn, down 6%, while Latin American revenue rose 6% to $741m. On the balance sheet, IBM shows $5.89bn in cash and equivalents on it balance sheet, down 22% year-over-year. Core debt, excluding global financing, increased $300m from year-end 1997 to $3.4bn. Global financing debt totaled $24.3bn, up $470m from the end of 1997. Share repurchases amounted to approximately $1.8 billion in the first quarter. The average number of shares outstanding in the quarter was 950.2 million compared with 1.0 billion in the first quarter of 1997.
