Although IBM Corp’s second quarter earnings came in a couple of pennies ahead of most analysts’ estimates as surveyed by First Call, it reported a profit of $1.4bn, up just 7.6% on $1.3bn last time, while revenue of $18.9bn was up only 4% on the same period last year and it’s clear Big Blue is hovering between the status of a low growth and a no growth company. Hardware revenue was flat at $8.6bn, including revenue from sales of the S/390 mainframes – supposedly enjoying something of a renaissance – although it claims ships measured in MIPS increased by 60%. Software sales decreased by 3% to $3.1bn. The semiconductor business could only have improved, and in other areas that IBM said performed particularly well – such as services – numbers can be massaged to make the overall outturn look as rosy as possible; and commercial PC systems – after overheads – are never going to contribute very much to IBM’s bottom line. It may be no surprise that consumer PCs are not making money, but disturbingly AS/400 has now joined RS/6000 on the sick list of products delivering less revenue now than last year. After turning over RS/6000 manufacturing to AS/400, sharing many common components, including the forthcoming Apache chip-set, can it be long before a single line of mid-range offerings with commercial and technical options is on offer? IBM has already farmed out a large number of its internet division products to other operations leaving general manager Irving Wladawsky-Berger looking increasingly like a captain with a phantom crew. North American revenues grew 10% to $8.6bn, Asia Pacific was up 4% at $3.8bn, Latin America revenue up 8% at $847m while European, Middle East and Africa revenue decline 5% to $5.7bn. Services revenue was up 24% at $3.3bn, maintenance revenue declined 7% to $1.6bn and rental and financing revenue was flat at $928m. It puts much of the blame of currency fluctuations. Gross margins fell to 39.2% to 39.5%. It bought in a further $1.6bn of its own stock, which leaves some 986.9 million shares outstanding – doesn’t it have anything else to spend its cash on? – while debt is up to $3bn. R&D in the quarter expenditure rose marginally over last year to $1.2bn, although it’s fallen as a percentage of revenue – 7.6% to 6.3% – from the first six months compared to the first half of 1996.
