IBM moves out of the woods
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Your support makes all the difference.INTERNATIONAL Business Machines showed itself to be well out of the woods yesterday, reporting third- quarter profits that exceeded all but the most optimistic predictions.
The computer maker made dollars 710m, or dollars 1.18 a share, compared with Wall Street estimates of 94 cents and a loss of dollars 87m in the same period in 1993. It was the fourth consecutive quarterly profit for IBM, which lost more than dollars 13bn in 1992 and 1993.
The company increased sales of mainframe computers for the first time in more than two years. Overall, revenues were up 8 per cent to dollars 15.4bn in what is traditionally a weak quarter for the computer industry, with gains of 13 per cent in European turnover.
Most impressively, IBM managed to buck the industry's trend towards lower gross profit margins thanks to a cost-cutting programme that has proved far more effective than expected. Expenses were 13 per cent below last year's levels.
IBM's chief executive, Louis Gerstner, called the results 'gratifying' and said they were evidence the firm had completed the first stage of its recovery, stabilisation, and was 'moving into the second stage of the transformation of IBM'.
'I see early signs that our long-term business strategies are beginning to take hold,' he said. 'Technology is moving from lab to manufacturing to market much faster.'
The results capped a long run-up in IBM's share price, which slipped 7 8 c to dollars 741 2 amid a wider sell-off on Wall Street. But analysts were unanimous in their praise of 'Big Blue's' rebound under Mr Gerstner - it traded at less than dollars 45 a share a year ago - and many indicated they would revise their earnings estimates upward for both 1994 and 1995.
The only weakness in the results is in sales of IBM personal computers in the US, which the firm admitted were 'still sluggish'. The figures were particularly disappointing in the light of the strong quarter reported by rivals.
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