IBM Q1 revenues rise 11%, but recovery may not last
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IBM has reported a robust rise in revenues and net income for its first quarter, but analysts warn that it may not last.
16 April 2004 IBM has reported a robust rise in revenues and net income for its first quarter, but analysts have warned that this does not necessarily point to a rise in global IT spending.
The company's revenues rose 11% to $22.3 billion, from the $20.1 billion achieved a year ago, and net income increased by a robust 16% to $1.6 billion.
The results, which met Wall Street expectations, were attributed by IBM to a strong showing in IT services. In addition, hardware revenues also rose thanks to a rebound in the PC market and gains against competitors such as Sun Microsystems.
Chief financial officer John Joyce was bullish. "We had a solid performance and are well positioned for the future," he said. "Signs of an upturn in IT spending that we saw in the fourth quarter have continued in the first quarter."
Joyce described Wall Street forecasts for the rest of the year as "reasonable", with analyst's consensus estimates suggesting full-year revenues of $95.7 billion.
However, analysts were less bullish than Joyce, crediting much of the company's financial performance to cost cuts and large sales of its intellectual property. They also cited the weakness in the dollar as a contributing factor top the headline revenue rise.
In recent years, IBM has bolstered its revenues with a string of acquisitions. But this strategy, suggest analysts, will be short-lived. This is partly because there are fewer potential acquisition targets big enough to provide a significant enough boost to IBM's revenues.
The company's flagging chip business is also a concern. Joyce stated that although chip yields were showing an improvement they were not yet "where they should be".
Separately, customer relationship management software supplier Siebel Systems posted a solid first quarter, but also expressed some caution about the IT industry's recovery prospects.
Siebel reported revenue of $329.3 million, down 1% from the same period a year ago, but licence revenue increased 13% to $126.8 million. Net income was $31.7 million, up from $4.6 million in the same quarter last year.
"We feel cautiously optimistic," said CEO Tom Siebel. "It's very clear that this IT recovery we're seeing is fragile. There is still geopolitical dislocation; there is quite a bit of uncertainty out there," he added.
