Earnings Report A Mixed Bag

CDW Computer Centers

CDW saw second-quarter sales hit $1.06 billion, an increase of 6 percent over the $995 million recorded for the year-ago quarter. Revenue for the quarter was a record for the 18-year-old Vernon Hills, Ill., company. Earnings jumped 2 percent to $44 million, or 49 cents per share, for the period.

CDW Chairman and CEO John Edwardson downplayed economic conditions or any economic turnaround for CDW's success. "We don't care if the economy is up or down; [the IT market CDW serves is huge and we just have a little slice of it."

But he said that the average revenue per customer was up for the first time in six quarters. "Clearly something is happening," he said. "We only get a fraction of our customers' total tech spending, and we don't know if we are getting a greater percentage of what they spend or if they are spending more."

Public sector sales at CDW grew 26 percent over second-quarter 2001, while corporate sales grew 2 percent.

Direct marketer PC Connection, Merrimack, N.H., earned $325,000, or 1 cent per share, on $292.2 million in sales for the second quarter ended June 30. For second quarter 2001 the company earned $1.4 million, or 6 cents per share, on revenue of $297.3 million.

Major vendors say the slow economy is still impacting revenue and earnings. IBM reported second-quarter earnings of $56 million, or 3 cents per share, on revenue of $20 billion after absorbing charges of $1.4 billion from discontinued operations.

But the company sees the tough economic environment impacting business for the remainder of the year.

Revenue for the quarter was down about 5 percent from the $20.8 billion reported for the year-earlier period. Earnings for the period ended June 30 were down about 97 percent from the $2 billion recorded in second-quarter 2001.

IBM CFO John Joyce stuck by analysts' estimates of $4 earnings per share for the year. Joyce said that he expects the tough economic environment to continue throughout the year. "But the downside in IT demand will be offset by continued cost-cutting," he said.

Joyce also said that IBM was scaling back its revenue growth for IBM Global Services for the second half. "We had expected double-digit revenue growth [during the second half," he said. "Now we are expecting modest revenue growth in second half 2002."

He said that because of the continuing tough economic environment, "many customers are deferring decisions." But, he added, "we have the largest outsourcing pipeline in years."

Joyce also said IBM was also seeing a pickup in business in the SMB market, which could be the harbinger of a turnaround.

Intel, which has avoided mass layoffs during the technology downturn, said last week it is cutting 4,000 jobs as the chip-making giant posted lower-than-expected second-quarter earnings.

Intel said continuing softness in demand for the chips that power PCs necessitates the 4.8 percent reduction in its workforce. "We haven't seen an economic recovery in our business yet," said Andy Bryant, Intel's CFO. "We want to be cautious in our spending."

For the three months ended June 29, the company said it earned $446 million, or 7 cents a share, compared with profit of $196 million, or 3 cents a share, in the same period last year.

Intel's sales were $6.32 billion, slightly lower than the $6.33 billion reported a year ago.