AS/400 Helps IBM to Strong Q3

IBM withstood global financial pressures to post a strong third quarter and the AS/400 helped write the success story.

Despite financial turmoil in Asia and Latin America and a depressed semiconductor market, Big Blue recorded third-quarter earnings of $20.1 billion, an 8 percent increase over the same period last year and earnings per share of $1.56, up 16 percent from the same period last year. Net income climbed 10 percent to $1.5 billion.

Revenues were up $1.3 billion from the second quarter of this year, while earnings per share increased by $.06. Net income remained steady.

Douglas Maine, senior VP and CFO of IBM, says IBM’s overall performance was good despite what he calls “short-term problems” in Asia, Latin America and the semiconductor market.

“IBM is better positioned for these pressures than many other companies. Our strong customer relations are very broad with a global presence ranging across all industries. We address the needs of small and large companies,” Maine says.

Hardware, including the AS/400, did its part to stave off negative economic factors. Hardware revenues climbed 4 percent (6 percent in constant currency) to $8.7 billion, a $1.2 billion increase over the second quarter. Maine credits the new System/390 G5 models and business PCs with being the star performers of the hardware group, but praises the AS/400 as well.

“The AS/400 and the RS/6000 servers also had good quarters,” he says. “We introduced our new Northstar PowerPC chip into both platforms for improved performance. Our Custom Server initiatives with leading ERP vendors are helping to attract new customers to the [AS/400] platform, generating over 20 percent of our shipments.”

Maine says Lotus Domino – which became available on the AS/400 with the V4R2 release of OS/400 in February – also was a driver for the AS/400, pointing out that Domino sales on the AS/400 in 1998 have already surpassed total Domino sales on Unix. He says about 10 percent of all Domino servers sold are on the AS/400.

“While the compares will get tougher, we are pleased with the progress of the AS/400 thus far,” Maine says.

Services continues to be the top performer in IBM’s portfolio, generating $5.8 billion in revenues, up 23 percent year-to-year (26 percent in constant currency).

“In good times, companies want assistance building e-business applications for growth,” Maine says, explaining the continuing services boom. “In bad times, they want to reduce costs and improve productivity and they want to do it quickly. We have customers in both situations and we are helping both groups.”

Software revenues jumped 5 percent (8 percent in constant currency) to $3.2 billion. Maine says OS/400 was the “key driver” in increased operating system software revenues.