IBM Q1 profit and sales grow

IBM Q1 profit and sales grow

IBM reported on Thursday net income and revenue growth in its first quarter of 2004, driven by sales increases worldwide and in the small- and mid-size business market.

IBM's revenue rose to US$22.2 billion, up 11 percent from 2003's first quarter. Net income reached $1.6 billion, up 16 percent, and per-share earnings were $0.93, in line with consensus analyst expectations, as reported by Thomson First Call.

IBM's Global Services unit brought in $11.1 billion, more than the company's hardware and software groups combined. IBM's profit margin there dropped, however, as it faced expensive infrastructure investments related to customer projects and weakness in its consulting and systems integration business. Those services remain dependent on an economic upturn, but IBM's outsourcing and maintenance businesses -- including hosting, maintenance and recovery services -- remain strong, Chief Financial Officer John Joyce said in a conference call with analysts.

Revenue increased 16 percent in the Asia-Pacific region.

Ongoing adjustments to IBM's employee roster cost the company $163 million, $85 million more than such adjustments cost in last year's first quarter. IBM had 319,300 employees at the end of 2003.

IBM's newly combined systems and technology division showed year-over-year revenue growth of 14 percent, Joyce said. He singled out the storage and Unix hardware markets as among the industry's most price-sensitive.

When IBM slowed its discounting of zSeries mainframe servers last year, the company saw a corresponding slowdown in demand, Joyce said. Now that the company has resumed "more aggressive" pricing, sales are back up, he said.

IBM's microchip unit -- included in the 'technology' part of its Systems and Technology Group -- continued its pattern of losing money but is expected to be profitable in 2004 through improving demands and yield, according to Joyce.

IBM's Personal Systems Group, including its laptop and desktop computers, showed 18 percent revenue growth but had an $11 million loss. That loss is narrower than last year's first-quarter shortfall of $69 million.

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