IBM Q3 Results

IBM announced third quarter 1999 diluted earnings per common share of $.93 compared with diluted earnings per common share of $.78 in the third quarter of 1998. Third quarter 1999 revenues increased 5 percent as reported and in constant currency to $21.1 billion. Third quarter 1999 net income totaled $1.8 billion compared with $1.5 billion in the third quarter of last year.

IBM’s third quarter 1999 results include an after-tax benefit of $63 million, or 3 cents per diluted common share, resulting from several actions that occurred in the quarter. Specifically, IBM closed the sale of its Global Network in a number of additional geographic areas. The company completed three acquisitions, resulting in charges for in-process research and development. IBM also took additional actions in the quarter to improve the competitiveness of the company’s Technology Group.

Hardware revenues were $8.8 billion in the third quarter, a decrease of 1 percent (2 percent at constant currency) compared with the same period of last year. PC revenues increased, with particularly strong growth in the Netfinity server line. Microelectronics revenues also increased, while RS/6000 revenues declined slightly. Storage revenues were flat and networking hardware revenues declined significantly from the same period of last year.

Software revenues increased 7 percent (8 percent at constant currency) in the third quarter to $3.0 billion. Revenues from the "middleware" category -- software that is critical for e-business -- increased 13 percent (14 percent at constant currency), with particularly strong results in Tivoli systems management, transaction processing and database products.

IBM’s overall gross profit margin was 35.8 percent in the third quarter compared with 37.2 percent in the third quarter of 1998. The transition in the networking hardware business negatively affected the company’s overall gross margin by .7 of a point and the hardware margin by 1.6 points.