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October 20, 1997updated 03 Sep 2016 7:17pm

IBM POSTS BETTER-THAN-EXPECTED Q3 EARNINGS WITH LOW GROWTH

By CBR Staff Writer

IBM Corp reported third-quarter figures that just edged out the First Call consensus for a quarter which it says was filled with currency problems, demand shifts and pricing pressures. Big Blue turned in net income which rose 5.8% to $1.36bn. Earnings per share were $1.38, when Wall Street was expecting $1.36. As with last quarter, revenue growth was barely that, inching up just 3% to $18.61bn. IBM was quick to point out that as a global company its constant currency figures are the ones to watch, but even in those terms, revenue growth was only 8%. Services, which saw new contracts worth $9bn signed in the quarter, continued to be strong, as were the areas of System/390 servers, commercial PCs and Lotus and Tivoli distributed software. The problem areas include consumer PCs – a unit which the company is pruning and folding back into the business PC division (CI No 3,268) – and the RS/6000 and AS/400 server lines. Total hardware sales were flat at $8.3bn, while services revenues grew 20% to $4.7bn. Overall software revenues dipped 2% to $3.0bn. Maintenance revenues fell 9% to $1.6bn. Geographically, revenues in North America grew 7% to $8.7bn; Asia-Pacific rose 7% to $3.8bn; Latin America increased 10% to $891m; but Europe, the usual suspect, saw revenue fall 6% to $5.2bn. Total gross profit margin for the quarter fell 2% to 38.2%. Overall expenses declined by 3%, in spite of a 4% rise in research and development spending. Nine- month net income rose 17.5% to $4.0bn, or $4.03 per share, on revenue up 3.8% at $54.79bn, although the year-ago period includes one-time charges of $435m stemming from the Tivoli and Object Technology acquisitions. On the balance sheet, IBM finished the quarter with cash and cash equivalents of $6.49bn. Although the company wouldn’t comment specifically on Q4, it sees 1997 on track for high single-digit growth in revenues – again, in constant currency.

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