IBM surpassed analysts' expectations for its fiscal first quarter results despite a revenue slide.
Revenue for the period ended 31 March declined five per cent to $19.3bn from $20.3bn last year. But net income increased to $1.52bn, or 83 cents per share, compared with $1.47bn, or 78 cents a year ago.
Analysts surveyed by First Call predicted earnings per share of 78 cents.
IBM chief executive, Lou Gerstner, said: "This was a transitional quarter, as we expected, with Y2K lockdowns continuing until late in the quarter."
Most business segments showed flat or negative growth. Hardware sales fell 12 per cent to $7.7bn, some of which were caused by IBM reducing dealer inventories of PCs and cutting back on low margin specials.
"IBM is going to be hit across the board because of Y2K, partly because its PC business is pretty heavily related to its enterprise business," said Gartner analyst Tom Bittman. "It sells PCs best into IBM accounts, not across the board like some other companies."
However, sales of Netfinity servers, ThinkPad laptops and web servers increased. Microelectronics revenue also grew on top of continued acceleration in shipments of custom logic chips.
Services and software revenue remained flat year-over-year at $7.6bn and $2.9bn, respectively.
Sales in Europe, the Middle East and Africa dropped 13 per cent to $5.4bn, but the Asia Pacific region pulled in revenue of $4bn, an increase of 15 per cent.
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