Dropping hardware sales prompt IBM earnings warning

Dropping hardware sales prompt IBM earnings warning

Blaming a continuing slowdown in customer spending, IBM sharply curtailed its first-quarter revenue and earnings expectations on Monday. The move surprised Wall Street analysts and sent IBM's share price tumbling.

IBM said it anticipates revenue of $US18.4 billion to $18.6 billion for the quarter to March 31, compared with $21 billion in the first quarter of last year. Pre-tax income is expected to be between $1.65 billion to $1.75 billion, IBM said, compared to pre-tax income of $2.49 billion in 2001's first quarter.

Per-share earnings will range from $0.66 to $0.70, IBM said. Prior to IBM's earnings warning, the consensus estimate of analysts polled by Thomson Financial/First Call was for per-share earnings of $0.85.

IBM's hardware business, particularly its OEM (original equipment manufacturer) operations, was hardest hit during the quarter, said John Joyce, IBM's chief financial officer, in a prepared statement.

IBM expects its Technology Group to post a 35 per cent revenue decline and a $200 million pre-tax loss, he said. The Technology Group includes IBM's microelectronics and storage technology product portfolios.

The first quarter is traditionally the weakest for technology purchases, and many customers are cutting or delaying spending until their businesses improve, Joyce said.

IBM's share price fell 9.9 per cent, to $87.62, in early trading on Monday on the New York Stock Exchange. En route, the share price hit $87, a new 52-week low for IBM.

IBM is scheduled to report its first-quarter results on April 17.

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