Big Firms Post Strong Results
AOL Time Warner and IBM are proof that elephants can dance.
The technology behemoths turned in surprisingly nimble-footed financial performances last week, while younger growth companies Akamai Technologies, EMC and Siebel Systems struggled to meet expectations and warned of slowdowns ahead.
IBM said its services business helped drive a 9 percent revenue increase and a 15 percent rise in earnings to $21 billion and $1.75 billion, respectively, for the first quarter. Service revenue was up 12 percent to $8.5 billion, with a backlog of $87 billion. E-business service revenue was up more than 40 percent.
IBM executives said they were comfortable with analysts estimates that earnings would grow almost 10 percent this year.
AOL Time Warner said its revenue for 2001 would be near $40 billion, or up roughly 12 percent to 15 percent from 2000. Revenue for the newly combined companys first quarter was $9.1 billion, a rise of 9 percent, had the two companies been one a year ago.
Revenue at America Online rose 17 percent to $2.1 billion, and operating earnings grew 35 percent to $684 million. Time Warners cable business took in $1.62 billion in sales, 12 percent more than a year ago, and its cash flow increased 15 percent to $768 million.
AOL Time Warner will have to stretch itself to reach its goal of $40 billion in revenue and $11 billion operating earnings this year, noted Lowell Singer, an analyst at Robertson Stephens. The company would have to grow revenue 15 percent and earning 33 percent something it has not done in any of its five previous quarters, he noted. Economic uncertainty and advertising are major hurdles.
Microsoft also turned in unexpectedly high numbers. The software maker announced net income of $2.45 billion on revenue of $6.46 billion for the quarter ended March 31, a 14 percent rise over the same quarter last year.
"Results were strong across all businesses and came in a little better than we expected," said John Connors, chief financial officer at Microsoft.
Not everybody did so well. Storage vendor EMC met reduced estimates with 29 percent growth in revenue to $2.34 billion and a 20 percent rise in earnings to $399 million, but indicated that growth for the year would slow to 20 percent. Frank Hauck, an EMC veteran, replaced Michael Ruffolo as executive vice president for sales.
Akamai recorded a $2.2 billion loss for the quarter, including $2 billion in investment write-downs, and revenue rose 457 percent to $40.2 million. That matched Akamais projections earlier in April for the quarter, but was below the $45 million goal it committed itself to early in the year.
Siebel beat revenue estimates of $558 million by reporting $588 million for the quarter, but CEO Tom Siebel said second-quarter sales would be up 25 percent to 30 percent, below analysts projections of 40 percent growth. Siebel is cutting its work force by 10 percent and executive salaries by 20 percent, and suspending executive bonuses. The company also said it will shut down its Sales.com site.