IBM Rings Up Solid QuarterIBM Rings Up Solid Quarter

IBM rode double-digit gains in sales of services, enterprise hardware, and middleware to a solid quarter in which the company saw both revenue and earnings rise significantly.

For the second quarter ended June 30, IBM said Wednesday that revenue climbed to $21.6 billion, up from $19.7 billion a year ago. IBM had net earnings of $1.7 billion, or 97 cents per share, up from $56 million, or 3 cents per share, in the comparable period last year--but those figures were dragged down by $1.4 billion in one-time charges.

Services revenue jumped 23% from the same period in 2002, helped by IBM's acquisition of the PricewaterhouseCoopers consulting firm. Software revenue rose 6%. Strong sales of business hardware were somewhat offset by weak sales of mainframes and PCs.

CFO John Joyce said IBM is on track to meet analysts' revenue and profit forecasts for all of 2003. But he was not holding out hope for an economic revival in the next five months. "I don't have to remind investors that second-half economic recoveries were expected back in 2001 and again in 2002," he said on a conference call. "We are going to take a more pragmatic view."

Joyce also said IBM would increase purchases of its stock in the second half.

Total hardware revenue was down 1% year over year to $6.6 billion. But revenue from the company's systems group, which includes eServers and storage products, increased 10% to $3.2 billion. Sales of zSeries mainframe processing power, as measured in MIPS (millions of instructions per second) fell 7%. Personal systems revenue, which includes sales of laptops and PCs, dropped 3% to $2.7 billion. Software sales increased 6% overall to $3.5 billion, with DB2 database sales up 16% and WebSphere business-integration software sales up 14%.