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April 13, 1988


By CBR Staff Writer

For the first time in a month of quarters, IBM yesterday managed to surprise the market with first quarter figures significantly better than forecast – albeit again as a result of a whole string of special factors, notably a lower tax rate. No doubt a little embarrassed at all the attention paid to the beneficial effect on its figures in recent quarters of translating for eign currencies into dollars translations, IBM did not provide the information this time, leaving anal ysts to estimate by how much the numbers were improv ed by the incredible shrinking greenback. The mess age from the company here was that currency calculat ions were no longer useful and may be misleading, adding that sales and profits would have risen even if translations had been taken into account. The numbers show net profit up 16.3% on turnover up 10%, and the latter figure will please analysts who were worried that growth would be no more than 5% to 6% (CI No 906). As for the per share figure, IBM has been improving it by buying in its shares, and so net per share was up 17.7% at $1.53 – a little ahead of the range analysts were suggesting on Monday. After tax margins improved to 7.8% from 7.4% a year ago, pre-tax margins were 13.1% against 12.5% and the tax charge, as in the fourth quarter of 1987, was lower at 40.6% against 41.3% this time last year. The com pany says that it has not yet implemented a new acc ounting standard for deferred taxes, and that if it does, the switch will improve its profits. Breaking down the $11,750m total turnover, sales were up 14.3% at $7,430m, which will be seen as significant good news. Software business soared 21.7% to $1,710m, and rentals and other services continued their decline, off another 10% to $742m – they’ll drop out of the figures altogether soon. The shocker for those who have not been following IBM’s machinations, reported here, to keep third party maintenance shops at bay, was that maintenance business fell 4.2% to $1,870m.

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