At $2.31 a share, IBM’s second quarter results were pretty much in line with the consensus forecast of analysts, who had been clustering around the $2.25 mark a month ago but had pushed their average up to $2.30 a share by last week. The 9.4% increase in turnover was achieved despite the drag of the rising dollar, which was substantially higher at June 30 when local results are translated into dollars, than it was in March. The company saw double digit growth in local currencies in both US and non-US businesses, but margins were squeezed a bit and after-tax margins were 8.2% in the first half of 1989, as against 8.5% in the same period last year. But the increases – in particular the 39% hike in second quarter net profits – are distorted by the fact that the company took a one-time net charge of $0.61 for plant closures in the second quarter last year; before that charge, per share earnings were up only 3%. Breaking the figures down, sales for the quarter rose 10.3% to $10,120m; support services rose 9.5% to $2,559m – but who knows what multitude of sins that figure hides – last year, IBM separated out maintenance, but this year has added another category of business from elsewhere. Whatever it is, it is does not come from the software operations: those are consistent with last year and rose 6.2% at $1,873m. Rentals and financing rose 4.5% to $661m – and it is from here that the activity that has been added to maintenance comes – in 1988 it aggregated rentals and other services to give a figure of $822m. The shares were off 75 cents immediately after the announcement, but the company’s shares had risen sharply on Monday, putting on $1.25 to $116 even. The first reaction from the analysts was no surprises.
