IBM Announces Second-Quarter Results

IBM announced second-quarter 1999 diluted earnings per common share of $1.28 compared with diluted earnings per common share of 75 cents in the second quarter of last year. Second-quarter 1999 revenues grew 16 percent (16 percent at constant currency) to $21.9 billion.

Second-quarter 1999 net income totaled $2.4 billion compared with $1.5 billion in the second quarter of 1998. These results include an after-tax benefit of approximately $700 million, or 37 cents per diluted common share, resulting from a number of actions that occurred during the quarter. Specifically, IBM closed the sale of the company’s Global Network in several key geographic areas. The company also took certain actions intended to improve the long-term competitiveness of the company’s microelectronics and storage businesses. In addition, IBM implemented an accounting change to shorten the depreciable lives of personal computers used within the company to three years from five years.

Second-quarter revenues from the Americas totaled $10.0 billion, an increase of 16 percent (18 percent at constant currency) compared with the same period of last year. Revenues from Europe/Middle East/Africa were $6.4 billion, up 14 percent (17 percent at constant currency). Asia-Pacific revenues grew 19 percent (9 percent at constant currency) to $3.6 billion. OEM revenues totaled $1.9 billion, a 21 percent increase (20 percent at constant currency) compared with the second quarter of 1998.

Hardware revenues were $9.4 billion in the second quarter, an increase of 22 percent (21 percent at constant currency) compared with last year’s second quarter. Personal computer, RS/6000 and System/390 server revenues increased. AS/400 revenues declined. Overall storage and microelectronics revenues grew in the quarter.

Revenues from IBM Global Services, including maintenance, grew 15 percent (15 percent at constant currency) in the second quarter to $8.0 billion. Excluding maintenance, Global Services revenues increased 19 percent (18 percent at constant currency) to $6.7 billion. IBM signed $9.5 billion in service contracts in the quarter and concluded the quarter with a total services contract backlog of approximately $55.2 billion.

Software revenues increased 9 percent (10 percent at constant currency) in the second quarter to $3.1 billion, with continuing strong results from the company’s Universal Database, transaction processing, Lotus Notes and Tivoli systems management products. The software gross margin improved 2.5 points year over year.

The company’s overall gross profit margin was 37.5 percent in the second quarter compared with 38.0 percent in the same period of 1998.