Poor result sends IBM diving

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The Independent Online
SHARES of International Business Machines plummeted yesterday after the computer maker's second-quarter recovery failed to meet the market's expectations, writes Larry Black.

The shares opened almost dollars 4 lower at dollars 96.25 after IBM reported pre-tax profits of dollars 1.2bn (pounds 619m) for the quarter, compared with dollars 237m in last year's dismal second quarter.

Revenues rose by almost 10 per cent to dollars 16.2bn. Earnings per share leapt from 22 cents to dollars 1.25, but that was almost 10 cents below the average gain predicted by most Wall Street analysts.

John Akers, IBM's chief executive who has embarked on a vast re-organisation plan that will turn the computer giant into a series of decentralised companies, said sales improved worldwide.

But he conceded that IBM's strength in high-end systems was more than offset by persistent weakness in sales of personal computers. The company's personal computer business manager 'knows what all of his competitors have done', Jim Clippard, an IBM spokesman said. 'Action is being taken' in the current third quarter, he said.

Second-quarter revenue growth exceeded estimates, but industry analysts seemed disappointed with its after-tax profit margin, which was 4.4 per cent compared with 0.9 per cent in the same period last year. Mr Akers defended his control over expenses, saying the company 'continues to reduce its resources.' Sales and general expenses fell 11 per cent over the second quarter of 1991, and research spending by 6 per cent.

Other company spokesmen said IBM was well ahead of its goal of reducing its workforce by an additional 20,000 this year, but said speculation of 40,000 to 60,000 redundancies in 1992 was 'way off base'.

The company maintained its estimate of 'mid-single digit range' revenue growth for the year. 'The tone of business in the US is continuing to improve,' Mr Clippard said.