Cost cuts drive IBM profit higher
April 19, 2006
New York - IBM said on Tuesday first-quarter profit rose 21 percent after the technology giant cut costs and sold its struggling personal computer business to a Chinese rival.
IBM said net income for the period ended March 31 climbed to $1.708 billion, or $1.08 a share. This year's results included the cost of stock option expenses, while last year's did not.
Revenue slipped to $20.7 billion from $22.9 billion last year, when IBM's revenue included sales from its now-divested PC unit. Not including that business, which IBM sold to Lenovo Group, Big Blue's revenue would have been flat from a year ago, excluding the impact of currency exchange rates.
The sales figure was in line with Wall Street expectations, while IBM topped the earnings estimates of analysts surveyed by Wall Street analysts, who forecast a profit of $1.04 a share.
The company's gross profit margin rose to 39.1 percent from 36 percent a year ago, thanks mainly to the PC unit spinoff. The company cut sales and marketing expenses by seven percent.
"IBM had a good quarter with excellent earnings-per-share results," said Samuel Palmisano, IBM chairman and chief executive.
"We continued to improve our profit performance with our strategic focus on higher-value segments of the marketplace, as well as with our emphasis on productivity and global integration.
"Our performance underscores the strength of our business model across a balanced portfolio of software, services and hardware, and demonstrates the benefits of the strategic actions we've taken in recent years to reposition the company."
Global services remained IBM's largest business, with revenue of $11.6 billion, down one percent from a year ago. The division also reported new bookings of $11.4 billion.
Hardware sales fell 32 percent to $4.6 billion, but excluding the divested PC business, they rose three percent, the company said. Software sales rose two percent to $3.9 billion.
The company did not give a second-quarter forecast. - AFP
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