December Inside IBM

Third Quarter Results Boost IBM Share Earnings

IBM announced third quarter 1999 diluted earnings per common share of 93 cents, compared with diluted earnings per common share of 78 cents 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 tok 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 billion. Revenues from the "middleware" category – software that is critical for e-business – increased 13 percent (14 percent at constant currency), with 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.


High-Capacity Hard Disk Drive

The 10,000 RPM Ultrastar 72ZX – currently the world’s highest capacity drive at 73 gigabytes (GB) – is part of a new, blazing fast family of server hard drives, which includes the 10,000 RPM, Ultrastar 36LZX and the 7,200 RPM, Ultrastar 36LP, which each store 36 GB.

The Ultrastar 72ZX is about the size of a paperback novel, yet can hold the equivalent of a floor of books at the New York Public Library, with room to spare. The Ultrastar 72ZX and the 36LZX 10,000 RPM drives also boast the most bits per square inch – 7.04 billion to be exact – of any server-class hard drive in the world.

The new Ultrastar 36LP and 36LZX drives will start shipping in limited quantities this quarter. The Ultrastar 72ZX will ship in first quarter 2000. For more information, visit their Web site at


U.S. Government Bestows Top Honors on IBM Security Products

The U.S. government’s National Institute of Standards and Technology (NIST) added the IBM S/390 CMOS Cryptographic Coprocessor and the IBM 4758 PCI Cryptographic Coprocessor to its Cryptographic Modules Validation list. Both coprocessors were awarded a level 4 certification, the government’s highest certification for commercial security in late 1998 and early 1999, respectively. These IBM security devices are the only cryptographic coprocessors that have been awarded this level of validation.

Granted by the U.S. Department of Commerce’s NIST organization, this security certification is known as the Federal Information Processing Standard (FIPS) 140-1. FIPS 140-1 certification requires an independent, accredited laboratory to perform rigorous testing and thorough security evaluations on behalf of NIST.

The S/390 CMOS Cryptographic Coprocessor is a specialized, hardware cryptographic chip that allows S/390 Parallel Enterprise servers to execute both symmetric key and public-key algorithms for highly secure electronic commerce. The IBM 4758 PCI Cryptographic Coprocessor is a tamper-responding, programmable PCI card.


Compaq, HP, IBM, Intel and Microsoft Form E-Alliance

Compaq, HP, IBM, Intel and Microsoft formed the Trusted Computing Platform Alliance (TCPA), an industry group focused on building confidence and trust of computing platforms in e-business transactions by creating an industry standard for security technologies in PC environments.

The alliance’s mission is the development of a new hardware and software specification that will enable technology companies to offer a more trusted and secure PC platform based on common standards. The five members are inviting other companies to join the TCPA and participate in the development of the new specification.

The alliance is inviting participation by new members in defining these and other areas of the specification. For more information about joining the Trusted Computing Platform Alliance, visit


E-Business for Small- and Mid-Sized Companies

AT&T and IBM allied to develop, market and distribute end-to-end e-business solutions for small- and mid-sized businesses.

The solutions will be delivered through IBM and AT&T joint channel partners and will include IBM software, a choice of IBM servers and managed Internet connectivity provided by AT&T. IBM and AT&T will support an integrated distribution channel to help the growing number of small- and mid-sized businesses to build an Internet presence.

The first set of solutions available under the alliance provides customers with the IBM e-business Start Now solution software, an IBM Netfinity, AS/400 or RS/6000 server and IBM’s Business Partner customization services. AT&T will provide Internet connectivity through its Managed Internet Access Service.