IBM Results Beat Expectations
BOSTON – International Business Machines Corp. (IBM) rebounded from a previous disappointment with second-quarter results announced Monday that, buoyed by improvement in the services division, surpassed analysts' expectations.
In the quarter that ended June 30, IBM showed net profit of $1.83 billion, or $1.12 per share, compared with $1.74 billion, or $1.01 per share, in the previous year.
However, that comparison is skewed because the sale of IBM's personal computer division to China's Lenovo Group Ltd. (search) closed on May 1, lowering the figures IBM posted in the remaining two months of the quarter. Looking only at continuing operations, IBM showed a profit of $1.85 billion, $1.14 per share.
Those figures also included three big one-time events that Wall Street traditionally discards when assessing a company's performance. IBM showed a gain of $1.1 billion from the Lenovo sale and a $775 million boost from an antitrust settlement with Microsoft Corp (MSFT). The company also took a $1.7 billion charge to account for the elimination of up to 13,000 jobs, primarily in Europe.
Second-quarter revenue was $22.27 billion, down 4 percent from $23.10 billion a year ago.
The revenue and earnings figures beat the estimates of analysts surveyed by Thomson Financial, who had forecast $1.03 per share on revenue of $21.96 billion.
"IBM returned to form in this quarter," Chairman and CEO Sam Palmisano (search) said in a statement.
IBM shares fell 57 cents to close at $81.81 on the New York Stock Exchange before the earnings report. The stock jumped as high as $84.50 in after-hours trading.
IBM's numbers were sure to be closely scrutinized for signs that Big Blue overcame the first-quarter problems that then caused earnings of 84 cents per share, or 85 cents on a recurring basis, well short of the 90 cents in analysts' forecasts.
At the time, some analysts said the gap would have been even bigger had IBM not misled Wall Street about the effect of expensing employee stock options. IBM said last month that the Securities and Exchange Commissionwas investigating.
One of the weak spots blamed for the first-quarter results was the technology-services division, which provides half the company's revenue. In the second quarter, however, IBM said services revenue increased 6 percent, or 4 percent without currency fluctuations.
In the first half of 2005, IBM earned $3.23 billion, $1.96 per share, on revenue of $45.18 billion. In the first half of 2004, the company's net income was $3.10 billion, $1.80 per share, with revenue of $45.27 billion.