IBM earnings outstrip forecasts

IBM yesterday reported sharply higher first-quarter earnings of $1.29bn, or $2.12 a share - four times the level of 1994 and well above analysts' forecasts, writes Mathew Horsman.

Competing computer manufacturer Compaq announced flat first-quarter earnings of $216m, only marginally higher than 1994's $213m, on sales 30 per cent higher at $2.3bn.

But shares of both companies firmed as investors focused on underlying revenue growth in the computer sector.

IBM chief executive Louis Gerstner cautioned against reading too much into the figures. "The first quarter of last year was relatively weak, which makes this year's first-quarter performance look especially strong," he said.

Analysts said IBM had benefited from a broad restructuring programme undertaken 18 months ago. The company spent $900m on restructuring last year, and another $1.4bn buying back some of its shares.

Strong cash flow meant that IBM's cash position remained relatively static year on year, ending the quarter at about $10.5bn.

Sales overall were up 18 per cent to $15.7bn, led by a buoyant market for personal computers. Sales in Europe, the Middle East and Africa rose nearly 16 per cent to $5.4bn.

Separately, IDG Marketing Services, a UK marketing company, predicted home sales of PCs in Europe would climb to 8 million by 1997 from about 5 million now.