IBM Computer, Laptops and Servers

IBM Reports 2004 Second-Quarter Results

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ARMONK, N.Y.--(BUSINESS WIRE)--July 15, 2004--IBM today announced second-quarter 2004 diluted earnings per common share of $1.16 from continuing operations compared with diluted earnings of $.98 per share in the same period of 2003, an increase of 18 percent. Second-quarter income from continuing operations was $2.0 billion compared with $1.7 billion a year ago, an increase of 15 percent. Revenues from continuing operations for the second quarter were $23.2 billion, up 7 percent compared with the second quarter of 2003 revenues of $21.6 billion.

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Samuel J. Palmisano, IBM chairman and chief executive officer, said: "The IBM team delivered another fine quarter, which demonstrated the power of our business model and the advantages of our continued focus on serving enterprises and institutions around the world.

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"We're seeing more and more clients move toward becoming on demand businesses. This is increasing demand for our portfolio of services and computing infrastructure products. It was another strong quarter for large-scale systems, led by zSeries enterprise servers. IBM Global Services signed more than $10 billion in new business, and we are off to a strong start in the emerging Business Process Transformation Services opportunity. We saw first-half growth of roughly 40 percent over last year, and we continue to invest heavily in this growth segment. IBM also grew significantly in emerging geographic markets in the first half, with 35 percent combined growth in China, Russia, India and Brazil. Our balance sheet is strong, with $8.2 billion of cash available, and we continue to post an excellent return on invested capital.

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"At a time of great change and opportunity in the IT industry, we remain focused on strengthening and broadening our client relationships through innovation and by delivering business solutions only IBM can provide. We continue to improve the operational effectiveness of the company. We are confident about our prospects going forward." notebooks
lenovo
Second-quarter revenue growth of 7 percent (4 percent, adjusting for currency) was driven by growth across all geographies. In the Americas, second-quarter revenues from continuing operations were $9.7 billion, up 2 percent (2 percent, adjusting for currency) from the 2003 period. Revenues from Europe/Middle East/Africa were $7.5 billion, an increase of 9 percent (2 percent, adjusting for currency). Asia-Pacific revenues grew 13 percent (6 percent, adjusting for currency) to $5.2 billion. OEM revenues increased 19 percent to $701 million compared with the second quarter of 2003. hard drive
travelstar
Revenues grew at a solid pace in four of IBM's five industry sectors in the second quarter with particularly strong growth from the Financial Services sector and Industrial sector, as well as sales to Small and Medium Businesses. gateway
laptop parts
Revenues from Global Services, including maintenance, increased 7 percent (2 percent, adjusting for currency) to $11.3 billion in the second quarter. Global Services revenues, excluding maintenance, increased 7 percent as well (3 percent, adjusting for currency). IBM signed services contracts totaling more than $10 billion and ended the quarter with an estimated services backlog, including Strategic Outsourcing, Business Consulting Services, Integrated Technology Services and Maintenance, of $118 billion. software
hard drives
Hardware revenues from continuing operations increased 12 percent (10 percent, adjusting for currency) to $7.4 billion in the second quarter versus the second-quarter 2003. In the current quarter, revenues from the Systems and Technology Group totaled $4.2 billion, up 10 percent due to eServer revenue increases for zSeries servers, which had particularly strong results, and xSeries Intel-based servers. The total delivery of zSeries computing power as measured in MIPS (millions of instructions per second) increased 75 percent in the quarter compared with the second quarter of 2003. Revenues for the eServer iSeries midrange servers slowed significantly, as did pSeries UNIX servers to a lesser degree, with both results reflecting lower demand partly due to the product transition to POWER5 architecture. Storage Systems revenues increased due to good demand for external midrange disk and tape products, and revenues from OEM Technology increased. Personal Systems Group revenues increased 16 percent to $3.2 billion, led by strong growth in mobile personal computers. electronics
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Revenues from Software were $3.5 billion, essentially flat compared with the second quarter of 2003 (down 4 percent, adjusting for currency). Revenues from IBM's middleware brands, which include WebSphere, DB2, Rational, Tivoli and Lotus products, were $2.7 billion, the same as the second quarter of 2003. Operating systems revenues decreased 2 percent to $577 million compared with the second quarter of 2003. desktop pc
desktop computers
WebSphere software, which facilitates customers' ability to manage a wide variety of business processes using open standards to interconnect applications, data and operating systems, extended its lead in market share by 5 points for full-year 2003, according to an industry report. Revenues for Data Management decreased 3 percent including revenues for DB2 database software, which increased 5 percent. Revenues from Tivoli software (infrastructure software that enables customers to centrally manage networks and storage) decreased 5 percent, and revenues for Lotus software, which enables customers to communicate, collaborate and learn effectively, decreased 2 percent. Revenues from Rational (comprehensive software development tools) decreased 5 percent compared with the second quarter of 2003. think pad
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Global Financing revenues declined 3 percent (6 percent, adjusting for currency) in the second quarter to $651 million. Revenues from the Enterprise Investments/Other area, which includes industry-specific IT solutions such as product life-cycle management software, increased 23 percent (19 percent, adjusting for currency) to $294 million compared with the second quarter of 2003. data recovery
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The company's total gross profit margin from continuing operations was 36.8 percent in the 2004 second quarter, compared with 37.0 percent in the second quarter of 2003. keyboard
monitor
In the second quarter of 2004, total expense and other income from continuing operations of $5.7 billion increased 3 percent over the year-earlier period. The company's selling, general and administrative expense-to-revenue ratio improved to 20.0 percent in the quarter compared with 20.6 percent in the second-quarter 2003, while SG&A expense increased 4 percent to $4.6 billion. Research, development and engineering expense increased 16 percent to $1.4 billion. Intellectual property and custom development income increased significantly in the quarter reflecting an IP transaction with AMCC for $208 million. Other (income) and expense was $23 million of net expense in the second quarter of 2004 versus $4 million of net expense in the same period last year. desktop
infosys
IBM's effective tax rate from continuing operations in the second-quarter 2004 was 30.0 percent, the same as the second quarter of 2003. refurbished laptops
wipro
For total operations, net income for the second quarter of 2004, including a loss from discontinued operations of $2 million, was $2.0 billion, or $1.16 per diluted common share. Net income for the second quarter of 2003, including a loss from discontinued operations of $20 million, was $1.7 billion, or $.97 per diluted share. lap top
refurbished
Share repurchases totaled approximately $1.3 billion in the second quarter. The weighted-average number of diluted common shares outstanding in the quarter was 1.71 billion compared with 1.76 billion shares in the same period of 2003. As of June 30, 2004, there were 1.68 billion basic shares outstanding. memory
intel
Debt, including Global Financing, totaled $21.9 billion, compared with $23.6 billion at year-end 2003. From a management segment view, the non-global financing debt-to-capitalization ratio was 2.4 percent as of June 30, 2004, and Global Financing debt declined $2.0 billion from year-end 2003 to a total of $21.3 billion, resulting in a debt-to-equity ratio of 6.9 to 1. as400
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Year-To-Date 2004 Results hardware
dual xeon
Income from continuing operations for the six months ended June 30, 2004 was $3.6 billion compared with $3.1 billion for the same period of 2003, an increase of 15 percent. Diluted earnings per common share from continuing operations was $2.09 compared with $1.77 per diluted share for the 2003 period, an increase of 18 percent. Revenues from continuing operations for the six months ended June 30, 2004 totaled $45.4 billion, up 9 percent (3 percent, adjusting for currency) compared with $41.7 billion for the six months of 2003. storage
seagate
For total operations, net income for the six months of 2004, including a loss from discontinued operations of $3 million, was $3.6 billion, or $2.08 per diluted common share, compared with the six months of 2003 net income of $3.1 billion, or $1.75 per diluted share, which included a loss from discontinued operations of $23 million. computer sales
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Forward-Looking and Cautionary Statements printers
technology
Except for the historical information and discussions contained herein, statements contained in this release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, as discussed in the company's filings with the Securities and Exchange Commission (SEC). mainframe
samsung
Presentation of Information in this Press Release computer repair
used computers
In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information which management believes provides useful information to investors: network
digital cameras
-- return on invested capital desktops
cognos
-- adjusting for currency hosting
netfinity
The rationale for management's use of non-GAAP measures is included as part of the supplementary materials presented within the second-quarter earnings materials. These materials are available on the IBM investor relations Web site at www.ibm.com/investor. internet
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Conference Call and Webcast digital camera
printer
IBM's regular quarterly earnings conference call is scheduled to begin at 4:30 p.m. EDT, today. Investors may participate by viewing the Webcast at www.ibm.com/investor/2q04. xseries
maxtor
Financial Results Attached data storage
hitachi
INTERNATIONAL BUSINESS MACHINES CORPORATION rational
COMPARATIVE FINANCIAL RESULTS websphere
(Unaudited; Dollars in millions except per share amounts) battery
it support
Three Months Six Months western digital
Ended June 30, Ended June 30, music
networks
Percent Percent toner
2004 2003 Change 2004 2003 Change cheap laptops
------- ------- ------- ------- ------- ------- wholesale
REVENUE brother
netvista
Global Services $11,327 $10,635 6.5% $22,426 $20,804 7.8% camera
Gross margin 25.2% 25.9% 24.8% 25.4% networking
sharp
Hardware 7,423 6,613 12.3% 14,158 12,421 14.0% cheap
Gross margin 29.2% 26.9% 28.0% 26.8% windows
monitors
Software 3,458 3,471 -0.4% 6,924 6,600 4.9% linux
Gross margin 86.3% 86.2% 86.2% 85.4% computer support
used laptops
Global Financing 651 672 -3.2% 1,313 1,377 -4.6% cameras
Gross margin 59.4% 54.6% 60.0% 56.8% scanners
panasonic
Enterprise Investments/ workstation
Other 294 240 22.6% 582 494 17.7% iseries
Gross margin 46.4% 41.9% 43.0% 39.2% backup
information technology
routers
TOTAL REVENUE 23,153 21,631 7.0% 45,403 41,696 8.9% 180gxp
notebook battery
security
GROSS PROFIT 8,525 7,998 6.6% 16,534 15,231 8.6% lotus
Gross margin 36.8% 37.0% 36.4% 36.5% virus
thinkpad t42
thinkpad 600
EXPENSE AND OTHER INCOME thinkpad 600e
thinkpad 570
S,G&A 4,632 4,460 3.9% 9,116 8,675 5.1% thinkpad 600x
% of revenue 20.0% 20.6% 20.1% 20.8% thinkpad 390x
thinkpad a31
R,D&E 1,426 1,226 16.3% 2,793 2,421 15.4% thinkpad x20
% of revenue 6.2% 5.7% 6.2% 5.8% bios update
laptops
Intellectual property toshiba
and custom development laptop battery
income (432) (199) 117.3% (612) (481) 27.2% thinkpad
Other (income) microsoft
and expense 23 4 451.2% 36 88 -58.5% laptop computers
Interest expense 33 41 -20.8% 68 81 -16.7% laptop computer
desktop computer
TOTAL EXPENSE AND notebooks
OTHER INCOME 5,682 5,532 2.7% 11,401 10,784 5.7% lenovo
% of revenue 24.5% 25.6% 25.1% 25.9% hard drive
travelstar
INCOME FROM CONTINUING gateway
OPERATIONS BEFORE laptop parts
INCOME TAXES 2,843 2,466 15.3% 5,133 4,447 15.4% software
Pre-tax margin 12.3% 11.4% 11.3% 10.7% hard drives
electronics
Provision for canon
income taxes 853 741 15.3% 1,540 1,335 15.4% desktop pc
Effective tax desktop computers
rate 30.0% 30.0% 30.0% 30.0% think pad
repair
INCOME FROM CONTINUING data recovery
OPERATIONS $1,990 $1,725 15.3% $3,593 $3,112 15.4% cisco
Net margin 8.6% 8.0% 7.9% 7.5% keyboard
monitor
DISCONTINUED OPERATIONS desktop
Loss from discontinued infosys
operations 2 20 3 23 refurbished laptops
wipro
NET INCOME $1,988 $1,705 16.6% $3,590 $3,089 16.2% lap top
====== ====== ====== ====== refurbished
memory
EARNINGS/(LOSS)PER SHARE intel
OF COMMON STOCK: as400
averatec
ASSUMING DILUTION hardware
CONTINUING dual xeon
OPERATIONS $1.16 $0.98 18.4% $2.09 $1.77 18.1% storage
DISCONTINUED seagate
OPERATIONS (0.00) (0.01) (0.00) (0.01) computer sales
------ ------ ------ ------ computer hardware
TOTAL $1.16 $0.97 19.6% $2.08* $1.75* 18.9% printers
====== ====== ====== ====== technology
BASIC mainframe
CONTINUING samsung
OPERATIONS $1.18 $1.00 18.0% $2.13 $1.80 18.3% computer repair
DISCONTINUED used computers
OPERATIONS (0.00) (0.01) (0.00) (0.01) network
------ ------ ------ ------ digital cameras
TOTAL $1.18 $0.99 19.2% $2.13 $1.79 19.0% desktops
====== ====== ====== ====== cognos
hosting
WEIGHTED-AVERAGE NUMBER netfinity
OF COMMON SHARES internet
OUTSTANDING (M's) cheap computer
ASSUMING digital camera
DILUTION 1,713.4 1,763.7 1,721.7 1,761.1 printer
BASIC 1,679.6 1,729.8 1,685.6 1,727.6 xseries
maxtor
* Does not total due to rounding. data storage
hitachi
rational
INTERNATIONAL BUSINESS MACHINES CORPORATION websphere
CONSOLIDATED STATEMENT OF FINANCIAL POSITION battery
(Unaudited) it support
western digital
At At music
(Dollars in millions) June 30, December 31, Percent networks
2004 2003 Change toner
-------- ----------- ------- cheap laptops
ASSETS wholesale
brother
Cash, cash equivalents, netvista
and marketable securities $8,193 $7,647 7.1% camera
networking
Receivables - net, inventories, sharp
prepaid expenses 33,216 37,351 -11.1% cheap
windows
Plant, rental machines, monitors
and other property - net 14,569 14,689 -0.8% linux
computer support
Investments and other assets 43,604 44,770 -2.6% used laptops
-------- -------- cameras
scanners
TOTAL ASSETS $99,582 $104,457 -4.7% panasonic
======== ======== workstation
iseries
backup
LIABILITIES AND STOCKHOLDERS' EQUITY information technology
routers
Short-term debt $7,505 $6,646 12.9% 180gxp
Long-term debt 14,421 16,986 -15.1% notebook battery
-------- -------- security
Total debt 21,926 23,632 -7.2% lotus
virus
Accounts payable, taxes, thinkpad t42
and accruals 26,852 31,254 -14.1% thinkpad 600
thinkpad 600e
Other liabilities 21,974 21,707 1.2% thinkpad 570
-------- -------- thinkpad 600x
TOTAL LIABILITIES 70,752 76,593 -7.6% thinkpad 390x
thinkpad a31
STOCKHOLDERS' EQUITY 28,830 27,864 3.5% thinkpad x20
-------- -------- bios update
TOTAL LIABILITIES AND laptops
STOCKHOLDERS' EQUITY $99,582 $104,457 -4.7% toshiba
======== ======== laptop battery
thinkpad
microsoft
INTERNATIONAL BUSINESS MACHINES CORPORATION laptop computers
SEGMENT DATA laptop computer
(Unaudited) desktop computer
notebooks
SECOND QUARTER 2004 lenovo
---------------------------------------------- hard drive
Pre-tax travelstar
Income gateway
(Loss) laptop parts
From software
(Dollars in millions) -------- Revenue --------- Continuing Pre-tax hard drives
External Internal Total Operations Margin electronics
-------- -------- ------- ---------- ------- canon
SEGMENTS desktop pc
desktop computers
Global Services $11,327 $759 $12,086 $1,089 9.0% think pad
% change 6.5% 9.2% 6.7% -6.8% repair
data recovery
Systems and Technology cisco
Group 4,154 276 4,430 603 13.6% keyboard
% change 9.7% 43.8% 11.4% 151.3% monitor
desktop
Personal Systems Group 3,165 40 3,205 27 0.8% infosys
% change 16.2% -9.1% 15.8% 437.5% refurbished laptops
wipro
Software 3,458 457 3,915 958 24.5% lap top
% change -0.4% 17.2% 1.4% 12.7% refurbished
memory
Global Financing 652 286 938 348 37.1% intel
% change -4.3% -6.8% -5.1% 17.6% as400
averatec
Enterprise Investments 269 2 271 (46) -17.0% hardware
% change 18.5% 100.0% 18.9% 47.1% dual xeon
storage
TOTAL SEGMENTS 23,025 1,820 24,845 2,979 12.0% seagate
% change 7.0% 11.7% 7.3% 21.1% computer sales
computer hardware
Eliminations / Other 128 (1,820) (1,692) (136) printers
technology
TOTAL IBM $23,153 $0 $23,153 $2,843 12.3% mainframe
% change 7.0% 7.0% 15.3% samsung
computer repair
used computers
SECOND QUARTER 2003 network
---------------------------------------------- digital cameras
Pre-tax desktops
Income cognos
(Loss) hosting
From netfinity
(Dollars in millions) -------- Revenue --------- Continuing Pre-tax internet
External Internal Total Operations Margin cheap computer
-------- -------- ------- ---------- ------- digital camera
SEGMENTS printer
xseries
Global Services $10,635 $695 $11,330 $1,168 10.3% maxtor
data storage
Systems and Technology hitachi
Group * 3,786 192 3,978 240 6.0% rational
websphere
Personal Systems Group 2,723 44 2,767 (8) -0.3% battery
it support
Software 3,471 390 3,861 850 22.0% western digital
music
Global Financing 681 307 988 296 30.0% networks
toner
Enterprise Investments 227 1 228 (87) -38.2% cheap laptops
wholesale
TOTAL SEGMENTS 21,523 1,629 23,152 2,459 10.6% brother
netvista
Eliminations / Other 108 (1,629) (1,521) 7 camera
networking
TOTAL IBM $21,631 $0 $21,631 $2,466 11.4% sharp
cheap
* 2003 Technology Group and Systems Group segment results have been windows
reclassified to conform with current reporting structure. monitors
linux
computer support
used laptops
INTERNATIONAL BUSINESS MACHINES CORPORATION cameras
SEGMENT DATA scanners
(Unaudited) panasonic
workstation
SIX MONTHS 2004 iseries
---------------------------------------------- backup
Pre-tax information technology
Income routers
(Loss) 180gxp
From notebook battery
(Dollars in millions) -------- Revenue --------- Continuing Pre-tax security
External Internal Total Operations Margin lotus
-------- -------- ------- ---------- ------- virus
SEGMENTS thinkpad t42
thinkpad 600
Global Services $22,426 $1,521 $23,947 $2,080 8.7% thinkpad 600e
% change 7.8% 9.1% 7.9% -3.3% thinkpad 570
thinkpad 600x
Systems and Technology thinkpad 390x
Group 7,930 512 8,442 773 9.2% thinkpad a31
% change 11.8% 35.8% 13.0% 84.5% thinkpad x20
bios update
Personal Systems Group 5,991 63 6,054 16 0.3% laptops
% change 17.2% -21.3% 16.6% 120.8% toshiba
laptop battery
Software 6,924 858 7,782 1,812 23.3% thinkpad
% change 4.9% 10.4% 5.5% 21.7% microsoft
laptop computers
Global Financing 1,317 566 1,883 722 38.3% laptop computer
% change -4.7% -6.0% -5.1% 26.9% desktop computer
notebooks
Enterprise Investments 544 4 548 (98) -17.9% lenovo
% change 16.2% 100.0% 16.6% 36.4% hard drive
travelstar
TOTAL SEGMENTS 45,132 3,524 48,656 5,305 10.9% gateway
% change 8.9% 9.0% 8.9% 20.7% laptop parts
software
Eliminations / Other 271 (3,524) (3,253) (172) hard drives
electronics
TOTAL IBM $45,403 $0 $45,403 $5,133 11.3% canon
% change 8.9% 8.9% 15.4% desktop pc
desktop computers
think pad
SIX MONTHS 2003 repair
---------------------------------------------- data recovery
Pre-tax cisco
Income keyboard
(Loss) monitor
From desktop
(Dollars in millions) -------- Revenue --------- Continuing Pre-tax infosys
External Internal Total Operations Margin refurbished laptops
-------- -------- ------- ---------- ------- wipro
SEGMENTS lap top
refurbished
Global Services $20,804 $1,394 $22,198 $2,151 9.7% memory
intel
Systems and Technology as400
Group * 7,094 377 7,471 419 5.6% averatec
hardware
Personal Systems Group 5,113 80 5,193 (77) -1.5% dual xeon
storage
Software 6,600 777 7,377 1,489 20.2% seagate
computer sales
Global Financing 1,382 602 1,984 569 28.7% computer hardware
printers
Enterprise Investments 468 2 470 (154) -32.8% technology
mainframe
TOTAL SEGMENTS 41,461 3,232 44,693 4,397 9.8% samsung
computer repair
Eliminations / Other 235 (3,232) (2,997) 50 used computers
network
TOTAL IBM $41,696 $0 $41,696 $4,447 10.7% digital cameras
desktops
* 2003 Technology Group and Systems Group segment results have been cognos
reclassified to conform with current reporting structure. hosting
netfinity
internet
Contacts cheap computer
digital camera
printer
IBM xseries
Edward Barbini, 914/499-6565
barbini@us.ibm.com