Recent Financials Instill Hope In Channel Players

Laurie Benson, president and CEO of Inacom Information Systems, a Madison, Wis.-based solution pro-vider, said, "We started out slow, but we will now exceed our expectations for the year." Growth has come in higher-end solutions such as storage, wireless and security, she added.

The absence of gloom from IBM boosted its share price more than $10 to $72 last Thursday when the company reported that its third-quarter earnings declined but, excluding discontinued operations, beat Wall Street expectations. Earnings for the quarter ended Sept. 30 fell 15 percent to $1.3 billion, or 78 cents per share, compared with $1.6 billion, or 92 cents per share, a year earlier. IBM said earnings from continuing operations were $1.7 billion, or 99 cents per share, topping a First Call consensus forecast of 96 cents per share.

IBM posted third-quarter revenue of $19.8 billion, flat compared with sales in third-quarter 2001.

Solution providers cheered IBM's third-quarter report but expressed concern over a potential competitive threat from the vendor's acquisition of the PricewaterhouseCoopers consulting business. "I'm very bullish on IBM for this quarter and into next year," said Joe Vaught, executive vice president and COO of Houston-based PCPC. But Vaught added that he was closely watching how IBM integrates PwC Consulting into IBM Global Services.

In a third-quarter earnings call with analysts, IBM CFO John Joyce said the vendor expects PwC Consulting to generate $1 billion in new revenue in the fourth quarter and that IBM would hit Wall Street estimates for the quarter. "Our goal is to achieve double-digit earnings growth," Joyce said of fiscal 2003.

Sun Microsystems, meanwhile, said it sees no end in sight to the economic slide and plans to cut 11 percent of its workforce, or about 4,400 employees. For its fiscal first quarter ended Sept. 29, Sun reported a loss of $111 million, or 4 cents per share, vs. a loss of $180 million, or 6 cents per share, a year ago. First-quarter sales were about $2.7 billion, down 4 percent year over year from $2.9 billion.

"Sun has done an outstanding job in maintaining fiscal discipline, but it hasn't been enough to counter-balance revenue shortfalls caused by the protracted economic downturn," said Sun CFO Steve McGowan.

The slack economy, however, didn't stop Bell Microproducts from posting a profit and revenue gain in its third quarter ended Sept. 30. The San Jose, Calif., distributor earned $436,000, or 2 cents per share, in the quarter vs. a loss of $3.3 million, or 20 cents per share, a year earlier. Third-quarter revenue rose 13 percent year over year to $552 million from $489 million.

"Our storage systems sales grew to a record level despite the weak IT spending environment that the industry is experiencing," said Don Bell, president and CEO of Bell Microproducts, adding he was "cautiously optimistic" about the outlook for the fourth quarter.

Led by robust sales of Windows XP and Office XP, Microsoft posted a 26 percent year-over-year revenue gain, to nearly $7.8 billion, for its fiscal first quarter ended Sept. 30. The software giant also reported earnings of $2.7 billion, or 50 cents per share, in the quarter, compared with earnings of about $1.3

billion, or 23 cents per share, in the year-ago period, which included a $1.2 billion charge for investment impairments.

CDW also landed on the upside, reporting record results for its fiscal third quarter ended Sept. 30. The Vernon Hills, Ill.-based direct marketer saw its earnings jump to $54.9 million, or 63 cents per share, in the quarter, up from $43.2 million, or 49 cents per share, a year ago. Sales rose 16 percent year over year to almost $1.2 billion vs. $991 million a year earlier.

Hopkinton, Mass.-based storage vendor EMC generated a revenue gain as well. For its fiscal third quarter ended Sept. 30, sales came in at roughly $1.3 billion, up about 4 percent year over year from $1.2 billion. Including $73 million in after-tax benefits, EMC had a third-quarter profit of $21 million, or 1 cent per share, compared with a $945 million loss a year earlier. But excluding those benefits, EMC would have posted a loss of $51 million, or 2 cents per share.