In the wake of IBM Corp publishing its second quarter figures on Friday showing earnings per share of $1.23, a full 10 cents below the Street’s consensus guess, so many people wanted to sell the shares and there were so few buyers about that trading in the shares could not open for over an hour. When trading finally did begin, the shares opened at $96 even, down $4.25 on Thursday’s close of $100.25, before starting to improve two or three bits.The company’s turnover grew 9.9% at $16,200m, rather more than expected, but people were looking at outright sales, and they put only 4.6% at $8,644m against a very weak 1991 second period and at a time in the cycle when ES/9000s should be going gangbusters. Chairman John Akers is back to his old chirpy self, saying despite difficult global economies and competitive pricing pressures, our revenue grew in all major geographies in the second quarter. Our revenue increase was led by continued growth in our services and software offerings. We continue to reduce our resources, and our expenses remain under control. We are making steady progress in reshaping IBM to be a better-focused, faster-moving competitor. What he did not mention is that costs and expenses actually rose 3.2% at $14,835m, which is likely to be because more people than allowed for have taken its money and run – it said it expects to exceed its stated goal of reducing its workforce by about 20,000 in 1992, but does not yet know by how much. During the quarter, outright sales rose 4.6% at $8,644m, software revenues were up 12.3% at $2,682m, maintenance was up 5.5% at $1,900m; stated services business soared 45% at $1,858m and rentals and financing rose 10.5% at $1,140m. On the debit side, the 3.2% rise in costs and expenses took them to $14,835m. Taking the first six months, sales are up by only 1.2% at the peak of the product cycle – yet last year, the company gave the early stage of the product cycle as a reason for poor sales. Software revenues are up by 8.2% in the half, but that is only commensurate with the price increases IBM has imposed.

Conference call

Maintenance looks to be on a dip, since it is up by 2.8%, yet prices have been increased by between 5% and 6.1%. On the soaring services figure, there is a suggestion that this now includes broking of used machines. The thing that is nagging at analysts is the fact that while the turnover increase exceeded their expectations, profits were lower than forecast, where both should have been out in the same direction. In its conference call with analysts, IBM said that it still expects turnover growth in the mid-single digits this year, suggesting that the 9.9% of the period just ended was ahead of the game – word is that current quarter business is very weak. IBM also said that sales of mainframes, AS/400s and workstations were strong, while personal computers were weak – and that disk drives were a weak spot in the quarter too. It hints at substantial price cuts on personal computers are on the way. On its US business, IBM said that it was up 9.4% from a year ago and that the tone of its business in the US is continuing to improve. On its continuing reduction in employment, IBM declined to expand further beyond saying that some analysts’ belief that the headcount reduction could reach a range of 40,000 to 60,000 this year is off-base.