Blaming the global economic slowdown and reporting that business conditions remain difficult, IBM and Microsoft have given cautious outlooks for the first half of 2002.
Big Blue said that market share gains in high-performance server computers and software helped compensate for declining sales of custom semiconductors and PCs.
Chief financial officer John Joyce explained that the underlying dynamics point to good growth in 2002, and described the average estimate of analysts as "reasonable".
He said that IBM had cut costs and should be able to improve results in its PC division regardless of the economy, but pointed out that the company's customers remain cautious.
Joyce added that expected charges for write-downs in goodwill, pension costs and equity holdings would not have a significant impact on 2002 earnings.
Net income was $2.33bn for the quarter ended 31 December, or $1.33 a share, down from $2.67bn, or $1.48 a share, a year earlier. Analysts had expected $1.32 a share, according to First Call.
Joyce said that, while sales declined, IBM was able to meet its profit forecast in the recent quarter because products with high profit margins, including mainframes and software, performed beyond expectations.
Sales, which fell 11 per cent to $22.8bn from $25.6bn a year earlier, fell short of the average estimate of $23.9bn by analysts polled by First Call.
Meanwhile, Microsoft chief financial officer John Connors said that the company expected global PC sales to drop this quarter and next, compared with a previous forecast for shipments to rise.
He explained that Microsoft has not seen a rebound in any of the world's major markets, and poor PC sales in Japan are hurting demand for software. "PC demand is still below what we had hoped," said Connors. "When there is a recovery, it will be modest."
Microsoft reported lower fiscal second-quarter net income and warned that sales this quarter will miss analyst targets because PC shipments are likely to fall.
Net income in the second quarter ended 31 December declined 13 per cent to $2.28bn, or 41 cents a share, from $2.62bn, or 47 cents, a year earlier, excluding $660m in costs related to a planned settlement of a class action lawsuit.
Without the legal charge, Microsoft profits would have been up eight per cent over the year-ago quarter. Revenues for the second quarter jumped 18 per cent to $7.74bn, compared with the $7.3bn average projection by analysts.
Connors warned investors not to get overly excited about the quarter's sales increase. "While we are pleased with our results this quarter, we are concerned about the health of the global economy and have yet to see a recovery in many of the world's largest markets," he said.
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