IBM blamed sluggish sales of its PCs and hard disk drives, and the year 2000 slowdown for its weak second quarter results.
For the period ending 30 June, Big Blue's revenue fell by one per cent to $21.7bn compared with the same period last year. Net income slid by 21 per cent to $1.9bn, or $1.06 earnings a share. However, IBM managed to top the $1 consensus of Wall Street analysts.
Chief executive Lou Gerstner said: "Our hard disk drive business, while improving quarter to quarter, is still a drag on our revenue growth. PCs improved quarter to quarter, but we're not satisfied with the results."
He said the company has experienced slow revenue growth for the past three quarters, despite an increase in profit.
Hardware revenue fell by five per cent because of price reductions in the System/390 range and a product transition in the AS/400 line. PCs sales also declined partly because of parts shortage in certain segments, said IBM.
Internationally, sales in Europe, the Middle East and Africa fell by nine per cent to $5.9bn, but the biggest growth was in Asia Pacific which increased by 20 per cent.
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