SAN FRANCISCO — Despite buyers' "positive" response to recent product announcements, International Business Machines on Tuesday posted its fifth straight quarterly earnings decline as its second-quarter net income fell 9.8% to $1.18 billion.
The announcement disappointed some on Wall Street, who in recent weeks had bid up the price of IBM's stock to new highs on expectations that second-quarter earnings would be closer to--or even up from--the results of a year earlier. In heavy trading on the New York Stock Exchange, the Armonk, N.Y.-based computer giant's stock closed at $167.50 a share, off $2.375, despite Tuesday's stock market rally.
Still, analysts saw several upbeat signs in IBM's report.
"For the first time in six quarters, growth in revenues has exceeded growth in expenses," said John B. Jones, a computer analyst at Montgomery Securities, a San Francisco brokerage firm.
Revenue in the period rose 4.3% to $12.8 billion from $12.27 billion a year earlier, when IBM had net income of $1.305 billion.
Jones said that with expenses apparently under control, IBM is well-positioned to benefit from expected sharp increases in revenue in the third and fourth quarters.
Demand Has Improved
Demand for personal computers and minicomputers is buoyant, as has been demonstrated by the strong earnings recently reported by Apple Computer and NCR, and IBM's new product offerings in these categories should lead to strong gains, Jones said. He predicted that the company's profit for the year will be up from last year's.
John F. Akers, IBM's chairman, said demand for his firm's Personal System/2 models, the personal computers that the company introduced in April, is very strong. He said IBM also has begun shipping, earlier than originally planned, some models of its new mid-range minicomputers, the 9370 system, and its 3090 E series large processors.
Akers said IBM was pleased that 13,000 U.S. employees took advantage of the company's special early retirement program, which ended June 30.
Echoing securities analysts, Akers said that IBM's employment-cutting measures, "together with the cost and expense actions we have implemented, will provide increasing benefits later this year and beyond."
For the first half of the year, IBM reported that net income fell 15.5% to $1.96 billion from $2.32 billion a year earlier.
Revenue for the six months climbed 4.8% to $23.48 billion.
In the next several weeks, industry sources say, IBM plans to mount another challenge in computer rival Apple's stronghold, the educational market, with the introduction of a personal computer priced at between $1,000 and $1,200.