By BRIAN BERGSTEIN, AP Business Writer
NEW YORK - Second-quarter earnings rose sharply at IBM Corp. and matched analysts' forecasts, but a lack of strong optimism in Big Blue's outlook sent its shares tumbling.
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IBM announced Wednesday that in the April-to-June period it earned $1.7 billion, 97 cents per share, up from $56 million, 3 cents per share, in the same quarter last year. Last year's figures were dragged down by $1.4 billion in one-time charges.
Revenue rose 10 percent to $21.6 billion, though without currency fluctuations the increase would have been 3 percent.
Taking discontinued operations out of the mix, IBM said it would have earned 98 cents per share — a 10 percent increase from 2002 — matching the forecast of analysts surveyed by Thomson First Call.
IBM beat the analysts' revenue estimate of $21.4 billion, and the chief financial officer, John Joyce, said the technology powerhouse was on track to meet profit and sales forecasts for the rest of the year.
Even so, IBM shares fell in extended trading after the announcement, and were off $3.10, 3.6 percent, at $83.64 Thursday morning on the New York Stock Exchange (news - web sites).
Joyce said technology demand is "good, but not robust." He said IBM's third quarter is off to a strong start, with some big orders placed already, but he was not holding out hope for a broader economic revival in the next five months.
"I don't have to remind investors that second-half economic recoveries were expected back in 2001 and again in 2002," he said on a conference call. "We are going to take a more pragmatic view."
Services sales jumped 23 percent from the same period in 2002, helped by IBM's acquisition of the PricewaterhouseCoopers consulting firm. Software revenue rose 6 percent, aided by the purchase of Rational Software Corp.
The successes in those categories — which account for two-thirds of IBM's business — helped overcome a 0.9 percent drop in hardware sales and an 18.4 percent plunge in financing revenue.
Still, Peter Kastner, chief research officer at Aberdeen Group Inc., said the former business consulting arm of PricewaterhouseCoopers has turned in a disappointing performance for IBM, while the technology consulting side has done better.
"IBM has yet to see, really, a return on that investment," he said.
On the conference call with analysts, Joyce was asked for an update on the Securities and Exchange Commission (news - web sites)'s investigation into how a Big Blue division booked revenue in 2000 and 2001. He would say only that the company is cooperating with investigators and declined to speculate on when the matter could be resolved.
For the first half of 2003, IBM posted profits of $3.1 billion, $1.75 per share, on revenue of $41.7 billion. Those figures rose from the first half of 2002, when IBM earned $1.2 billion, 71 cents per share, on revenue of $37.7 billion.
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