IBM Reports $20.1 Billion In Sales for 1Q

Thomson Financial/First Call had predicted earnings of 80 cents per share. Still, IBM executives sought to emphasize the quarter's 11 percent growth in sales over the year-ago period, which included a quarterly profit of $1.4 billion.

CFO John Joyce said that the figures reflect IBM's new strategy to invest "more of our strong cash flow in strategic acquisitions than in stock buyback.

"We are on track for 2003 and to meet the [financial] analysts' full-year average revenue and profit," he said.

Joyce said that each segment of IBM Global Services gained market share in the quarter. More than $12 billion in total services contracts were signed this quarter.

Overall, IGS accounted for $10.2 billion of IBM's total quarterly sales. The backlog for global services at quarter's end stood at $113 billion.

Joyce said that IBM has retained 98 percent of the former PwC Consulting partners attained in the buyout of that organization last summer. "We have regained 110 of the 149 accounts that had dropped PwC Consulting prior to the acquisition," Joyce said.

Many of the customers that had dropped PwC Consulting had been "concerned about the auditor independence issue," he said.

By geography, sales of all IBM products and services in the Americas accounted for $8.6 billion, just 5 percent over the same period a year ago. More significant was revenue for the Europe/Middle East/Africa market, which was $6.3 billion, a 23 percent increase over the same period in 2002.

Asia-Pacific revenue was up 14 percent, to $4.5 billion.

The war in Iraq was the primary "geopolitical situation that caused some customers to defer buys," Joyce acknowledged.

IBM's hardware revenue, at $5.8 billion, was down 1 percent, impacted by its selling its display and disk-drive businesses in 2002.

OEM revenue was down 15 percent from the year-ago quarter, to $690 million.

Software revenue increased 8 percent in the quarter, to $3.1 billion. Sales of WebSphere and DB2 products, which IBM calls its middleware category, were up 9 percent over the year-ago quarter.

Joyce said that sales of Informix products "declined as more customers adopted DB2."

The first quarter also included one month of revenue from Rational Software, the acquisition of which IBM completed in February. "Our first phase of integration [of Rational and IBM products] is already ahead of schedule," Joyce said.