IBM ANNOUNCES 1994 SECOND QUARTER RESULTS
ARMONK, N.Y., July 21, 1994 . . . IBM today reported second-quarter 1994 earnings of $689 million, and $1.14 per share of common stock. During the same period of last year, IBM posted a loss of $40 million ($.08 per common share) before restructuring charges and $8.0 billion ($14.10 per common share) after restructuring charges. Second quarter 1994 revenues were $15.4 billion, an increase of three percent over the second quarter of 1993 after adjusting for the sale of IBM's Federal Systems Company (FSC).
IBM Chairman and CEO Louis V. Gerstner, Jr., said, "I'm pleased with our continued progress. Our revenues increased for the second quarter in a row and grew four percent through the first half of this year. Expenses again declined sharply and our gross margin remained stable for the seventh consecutive quarter. We are still far from where we need to be, but we are showing steady improvement.
"Significantly, we are seeing an acceleration in new product introductions. We made four particularly important product introductions during the quarter involving our mainframe, AS/400, RISC System/6000 products and ATM networks."
Second quarter 1994 revenues were flat in the United States and Europe, at $5.9 billion and $5.5 billion, respectively, compared with the second quarter of 1993. Asia-Pacific revenues were $2.8 billion, an increase of 14 percent over the comparable period of last year. Revenues from Latin America were $620 million, flat year over year. Currency had a slight adverse effect on revenues in the second quarter.
Overall hardware revenues were $7.7 billion, an increase of three percent compared with the second quarter of 1993. Within major hardware categories, high-end mainframe demand exceeded supply in the second quarter, although revenues declined as a result of year-over-year price reductions. Demand also exceeded supply in the second quarter for PowerPC-based RISC System/6000 systems and certain mobile personal computers and high-end storage products.
Mid-range AS/400 revenues declined compared with the same period of 1993 as a result of transitions to newly introduced AS/400 models. RISC System/6000 revenues increased over the second quarter of last year.
Personal computer revenues increased in the second quarter, year over year, due entirely to international markets. U.S. results were sluggish.
Total software revenues were flat in the second quarter compared with a year earlier. Services revenues increased by 24 percent, after adjusting for the sale of FSC, and services margins improved year over year. Maintenance, rentals and financing revenues decreased from the second quarter of 1993.
The company's overall gross profit margin was 39.8 percent in the second quarter compared with 39.7 percent in the second quarter of 1993.
Total expenses declined by 18 percent in the second quarter compared with the year-earlier period as a result of continuing management focus on expense control, work force reductions and facility consolidations.
IBM also announced today that it has revised its long-term expense-reduction goal. Last July, IBM announced plans to reduce its expenses by $7 billion by 1996, compared to 1992. IBM said today that the company now plans to reduce its expenses by $8 billion by 1996, an increase of $1 billion, as a result of significant re-engineering projects currently under way throughout the company. As of June 30, 1994, the company had reduced its expenses by a cumulative $4.8 billion toward this goal. IBM completed the second quarter with cash and marketable securities of approximately $8.6 billion. Total debt has declined by $2.1 billion since December 31 of last year, resulting in total debt of $25.2 billion as of June 30, 1994.
Net earnings for the six months ended June 30, 1994 were $1.0 billion ($1.68 per common share), excluding the FSC sale and the effect of accounting charges for the change in software amortization periods recorded in the first quarter of 1994. This compares with a net loss of $372 million ($.66 per common share) before restructuring charges and an accounting change (a) for the comparable period of last year ($8.4 billion and $14.80 per common share after restructuring charges and the accounting change). Revenue for the six months ended June 30, 1994, was $28.7 billion, up four percent from the prior year's $27.6 billion, adjusted for the FSC sale.
The average number of shares outstanding for the six-month period was 583.1 million in 1994 and 570.4 million in 1993.
(a) 1993 cumulative effect of Statement of Financial Accounting Standards (SFAS) 112,"Employers' Accounting for Postemployment Benefits."
INTERNATIONAL BUSINESS MACHINES CORPORATION
SUPPLEMENTAL SCHEDULE - COMPARATIVE FINANCIAL RESULTS (1)
(Unaudited; Dollars in millions except per share amounts)
Three months ended June 30
Percent
1994 1993 Change
-------- -------- -------
Revenue:
Hardware sales $7,695 $7,459 3.2%
Gross profit margin 33.2% 30.9%
Software 2,726 2,715 0.4%
Gross profit margin 62.5% 62.0%
Services 2,293 1,853 23.7%
Gross profit margin 19.6% 17.2%
Maintenance 1,796 1,857 -3.3%
Gross profit margin 49.7% 53.6%
Rentals and financing 841 1,069 -21.3%
Gross profit margin 59.4% 59.8%
Total revenue 15,351 14,953 2.7%
Gross profit 6,104 5,941 2.7%
Gross profit margin 39.8% 39.7%
Operating expenses:
S,G&A 3,935 4,480 -12.1%
Expense to revenue 25.6% 30.0%
R,D&E 1,091 1,376 -20.7%
Expense to revenue 7.1% 9.2%
Restructuring charges --- --- ---
Operating income (loss) 1,078 85 ---
Other income 479 154 211.9%
Interest expense 364 322 13.1%
Earnings (loss) before
income taxes 1,193 (83) ---
Pre-tax margin 7.8% -0.6%
Provision (benefit) for
income taxes 504 (24) ---
Effective tax rate 42.3% 29.0%
Net earnings (loss) 689 (59) ---
Net margin 4.5% -0.4%
Preferred stock dividends 21 5 ---
Net earnings (loss) applicable
to common shareholders $668 ($64) ---
====== ======
Per share of common stock amount:
Net earnings (loss) $1.14 ($0.11) ---
====== ======
Average number of common
shares outstanding 584.0 570.2
(1) Supplemental information provided for comparative purposes
1993 excludes $8.9 billion restructuring charge and FSC
results
INTERNATIONAL BUSINESS MACHINES CORPORATION
SUPPLEMENTAL SCHEDULE - COMPARATIVE FINANCIAL RESULTS (1)
(Unaudited; Dollars in millions except per share amounts)
Six months ended June 30
Percent
1994 1993 Change
-------- -------- -------
Revenue:
Hardware sales $13,963 $13,145 6.2%
Gross profit margin 31.8% 30.2%
Software 5,309 5,236 1.4%
Gross profit margin 62.6% 62.4%
Services 4,128 3,368 22.6%
Gross profit margin 17.6% 20.7%
Maintenance 3,564 3,661 -2.7%
Gross profit margin 50.2% 51.4%
Rentals and financing 1,760 2,156 -18.4%
Gross profit margin 59.8% 58.2%
Total revenue 28,724 27,566 4.2%
Gross profit 11,340 11,064 2.5%
Gross profit margin 39.5% 40.1%
Operating expenses:
S,G&A 7,466 8,556 -12.7%
Expense to revenue 26.0% 31.0%
R,D&E 2,192 2,732 -19.8%
Expense to revenue 7.6% 9.9%
Restructuring charges --- --- ---
Operating income (loss) 1,682 (224) ---
Other income 887 345 157.0%
Interest expense 777 627 24.0%
Earnings (loss) before
income taxes 1,792 (506) ---
Pre-tax margin 6.2% -1.8%
Provision (benefit) for
income taxes 768 (134) ---
Effective tax rate 42.8% 26.5%
Earnings (loss) before effect
of change in accounting
principle 1,024 (372) ---
Cumulative effect of change
in accounting principle --- --- ---
Net earnings (loss) 1,024 (372) ---
Net margin 3.6% -1.3%
Preferred stock dividends 42 5 ---
Net earnings (loss) applicable
to common shareholders $982 ($377) ---
====== ======
Per share of common stock amounts:
Earnings (loss) before effect
of change in accounting
principle $1.68 ($0.66) ---
Effect of change in accounting
principle --- --- ---
Net earnings (loss) $1.68 ($0.66) ---
====== ======
Average number of common
shares outstanding 583.1 570.4
(1)Supplemental information provided for comparative
purposes.
1994 excludes effects of FSC Sale and writedown of software
1993 excludes $8.9 billion restructuring charge,SFAS 112
and FSC results
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three months ended June 30
Percent
1994 1993 Change
Revenue: -------- -------- -------
Hardware sales $7,695 $7,526 2.3%
Gross profit margin 33.2% 30.6%
Software 2,726 2,715 0.4%
Gross profit margin 62.5% 62.0%
Services 2,293 2,352 -2.5%
Gross profit margin 19.6% 15.0%
Maintenance 1,796 1,857 -3.3%
Gross profit margin 49.7% 53.6%
Rentals and financing 841 1,069 -21.3%
Gross profit margin 59.4% 59.8%
Total revenue 15,351 15,519 -1.1%
Gross profit 6,104 5,974 2.2%
Gross profit margin 39.8% 38.5%
Operating expenses:
S,G&A 3,935 4,487 -12.3%
Expense to revenue 25.6% 28.9%
R,D&E 1,091 1,376 -20.7%
Expense to revenue 7.1% 8.9%
Restructuring charges --- 8,945 ---
Operating income (loss) 1,078 (8,834) ---
Other income 479 158 204.1%
Interest expense 364 322 13.1%
Earnings (loss) before
income taxes 1,193 (8,998) ---
Pre-tax margin 7.8% -58.0%
Provision (benefit) for
income taxes 504 (962) ---
Effective tax rate 42.3% 10.7%
Net earnings (loss) 689 (8,036) ---
Net margin 4.5% -51.8%
Preferred stock dividends 21 5 ---
Net earnings (loss) applicable
to common shareholders $668 ($8,041) ---
====== ======
Per share of common stock amount:
Net earnings (loss) $1.14 ($14.10) ---
====== ======
Average number of common
shares outstanding 584.0 570.2
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Six months ended June 30
Percent
1994 1993 Change
Revenue: -------- -------- -------
Hardware sales $13,963 $13,263 5.3%
Gross profit margin 31.8% 29.9%
Software 5,309 5,236 1.4%
Gross profit margin 57.0% 62.4%
Services 4,128 4,261 -3.1%
Gross profit margin 17.6% 18.0%
Maintenance 3,564 3,661 -2.6%
Gross profit margin 50.2% 51.4%
Rentals and financing 1,760 2,156 -18.4%
Gross profit margin 59.8% 58.2%
Total revenue 28,724 28,577 0.5%
Gross profit 11,044 11,136 -0.8%
Gross profit margin 38.4% 39.0%
Operating expenses:
S,G&A 7,084 8,563 -17.3%
Expense to revenue 24.7% 30.0%
R,D&E 2,192 2,732 -19.8%
Expense to revenue 7.6% 9.6%
Restructuring charges --- 8,945 ---
Operating income (loss) 1,768 (9,104) ---
Other income 887 353 151.2%
Interest expense 777 627 24.0%
Earnings (loss) before
income taxes 1,878 (9,378) ---
Pre-tax margin 6.5% -32.8%
Provision (benefit) for
income taxes 798 (1,057) ---
Effective tax rate 42.5% 11.3%
Earnings (loss) before effect
of change in accounting
principle 1,080 (8,321) ---
Cumulative effect of change
in accounting principle (1) --- (114) ---
Net earnings (loss) 1,080 (8,435) ---
Net margin 3.8% -29.5%
Preferred stock dividends 42 5 ---
Net earnings (loss) applicable
to common shareholders $1,038 ($8,440) ---
====== ======
Per share of common stock amounts:
Earnings (loss) before effect
of change in accounting
principle $1.78 ($14.60) ---
Effect of change in accounting
principle --- ($0.20) ---
Net earnings (loss) $1.78 ($14.80) ---
====== ======
Average number of common
shares outstanding 583.1 570.4
(1) Refer to note (a)
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