IBM?s services business drove the company to higher than expected second quarter results, with a 24 per cent increase in revenue, but Europe was once again a chink in the armour.
Second quarter profits were $1.4 billion on revenues of $18.9 billion against figures of $1.3 billion on revenues of $18.2 billion for the comparable quarter in 1996. At the half year mark, revenues of $36.2 billion were up 4.1 per cent on last year?s $34.7 billion with profits up from $2.1 billion to $2.6 billion.
The results were a pleasant surprise for Wall Street, which had predicted earnings per share of $1.42, rather than the $1.46 IBM achieved.
But Europe was the big disappointment, with revenues down by five per cent to $5.7 billion. In contrast, north Amercan revenues rose by 10 per cent to $8.6 billion, Latin America rose by eight per cent to 4.84 billion and Asia Pacific by four per cent to $3.8 billion.
Hardware sales were essentially static, up 0.4 per cent on last year at $8.6 billion, but software revenue fell 3.4 per cent to $3 billion and revenue from maintainance did even worse with a fall of seven per cent to $1.6 billion.
But the success story of the quarter was the services business, which shot up 23.5 per cent to $4.6 billion.
During the quarter IBM completed its acquisition of US network services firm Advantis and took a majority stake in Web site developer NetObjects, two corporate manoeuvres that chief executive Lou Gerstner cited as major contributors to the success of the services division. "They will further strengthen our position in the rapidly growing areas of services and network computing," he said.
Gerstner said that, despite the static performance indicated by the company?s hardware-related revenues, there were areas of good news. "We saw very good response to our new System/390 servers and continuing strength in hard disks," he said. "There was substantial year-on-year improvement in our semiconductor business. Our PC commercial and PC server results were good and more than offset declines in some other segments, most notably our consumer PC business and the AS/400 and RS/6000 server lines."
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