IBM CFO Foresees Tough Second Half

IBM

Still, the company foresees 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 earnings per share of $4 for the year. Joyce said he expects the tough economic environment to continue throughout the year. "But the downside in IT demand will be offset by continued cost cutting," Joyce said.

IBM recently sold its hard-disk business to Hitachi and reorganized its microelectronics business. Those two actions account for the bulk of 81-cents-per-share charges during the quarter. Without those charges, earnings per share would have been 84 cents.

In addition, IBM incurred charges of $33 million during the quarter on workforce "rebalancing," but Joyce declined to say how many IBM employees had been laid off.

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 differing decisions." But "we have the largest outsourcing pipeline in years," he added.

It was a mixed bag for IBM in the eServer and storage business for the quarter, with overall business down 17 percent from the year-earlier period. The pSeries was down 27 percent and iSeries was down 27 percent, but xSeries business was up 13 percent.

Joyce said the server revenue numbers reflect the fact that "Lintel is encroaching on low-end Unix systems."

Storage revenue was down 11 percent for the period.

Software was a bright spot for IBM, with middleware revenue up 10 percent and DB2 revenue growing 11 percent over second-quarter 2001.

Joyce also said IBM saw some pickup in the SMB market during the period. "SMB is a leading indicator [of an economic upturn," he said.