IBM Takes the Good with the Bad

By Jeffrey Burt  |  Posted 2001-10-16

IBMs earnings and revenues both dropped in the third quarter, but according to officials on Monday, several business units saw gains, most surprisingly, its high-end server series.

The Armonk, N.Y., computer giant announced that third-quarter revenues came in at $20.4 billion, down about 6 percent in comparison with the same year ago period.

Net income also declined about 19 percent, from $2 billion during the third quarter last year to $1.6 billion this year. Earnings per share also dropped, to 90 cents per share, down about 17 percent from the $1.08 third-quarter earnings in 2000.

"The third quarter saw an acceleration of the fundamental shift in customer buying behavior that is altering our industrys landscape," Chairman and CEO Louis Gerstner Jr. said in a prepared statement. "Customers now allocate an increasing percentage of their spending to solutions, not boxes."

That shift benefited IBMs Global Services division, which saw revenues grow to $8.7 billion in the third quarter that ended Sept. 30, a jump of 5 percent over last year. Software sales also grew by 10 percent, to $3.2 billion. Middleware revenues, which is about 80 percent of IBMs overall software revenues, jumped 18 percent.

Gerstner said a surprising trend was the 42 percent growth in revenues in IBMs powerful high-end zSeries servers.

"Customers all over the world see the value of server consolidation," Gerstner said.

Expenses at IBM also climbed 5 percent, to $5.1 billion. The company said it will continue to trim expenses through such measures as increased use of e-procurement and online learning.

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