IBM Revenue Jumps

By Jeffrey Burt  |  Posted 2003-04-14

IBM Revenue Jumps

Fueled by services and software growth, IBM on Monday reported that revenue in the first quarter jumped 11.3 percent while income grew 8 percent.

For the quarter ending March 31, the Armonk, N.Y., company earned $1.4 billion on revenue of $20.1 billion, both increases over the first quarter in 2002.

The gains in services and software were offset by a 1.3 percent drop in hardware revenue—to $5.8 billion—particularly in the eServer zSeries mainframe group, which saw about a 16 percent drop. However, John Joyce, senior vice president and chief financial officer, said in a conference call with analysts that much of that drop was the result of customers waiting for the next mainframe release—code-named T Rex—later this quarter.

Revenue for IBMs Global Services group increased 23.6 percent, to more than $10.1 billion—driven in large part by the companys $3.5 billion acquisition last fall of PricewaterhouseCoopers consulting business, Joyce said.

The unit in the first quarter generated 15 deals of more than $100 million, and on that topped $2 billion. IBM also was able to regain 110 of the 149 accounts that dropped PricewaterhouseCoopers before the acquisition.

"Our on-demand value proposition continued to address our customers requirements," Joyce said.

He also said that an acquisition has helped boost IBMs software unit. In February, IBM bought Rational Software Corp. for $2.1 billion, a move Joyce said has added more capabilities to the companys middleware families, such as WebSphere and DB2.

Page 2

Software revenue grew 8 percent, to $3.1 billion. The companys middleware products, including WebSphere and DB2, grew 9 percent.

Joyce said that sales of the companys Informix database slid as customers moved onto IBMs flagship database management software, DB2, which grew 22 percent.

Ari Fishkind, a spokesman for IBM, stressed that Informix customers arent jumping ship. Rather, theyre gradually embracing other members of the DB2 family. "These are long-term relationships," said Fishkind, in Somers, N.Y. "The Informix product line is being refreshed. They also now have access to other members of the DB2 family. Theyre using other members of the family for whatever infrastructure needs they have, whether its managing content or whatever."

In other software results, sales of Tivoli and Lotus dropped.

On the hardware side, IBM saw revenue in its Unix-based pSeries, mid-range iSeries and Intel Corp.-based xSeries servers grow, thanks in large part to new innovations, Joyce said. For example, IBM introduced the 64-bit Power4+ chip into the p630 server and will appear in the p690 later this quarter, he said.

IBM officials expect the zSeries business to improve with the release of T Rex, which Joyce said will bring new virtualization and automation capabilities and will enable users to consolidate their Unix, Linux and Windows platforms.

IBMs Shark storage line also grew 22 percent, Joyce said. However, PCs dropped 5 percent.

Senior Writer Lisa Vaas contributed to this article.

Latest IBM News:

Rocket Fuel