UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 21, 1999
(Date of earliest event reported)
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Exact name of registrant as specified in its charter)
New York 1-2360 13-0871985
(State of Incorporation) (Commission (IRS employer
File Number) Identification No.)
ARMONK, NEW YORK 10504
(Address of principal executive offices) (Zip Code)
914-499-1900
(Registrant's telephone number)
Item 5. Other Events
The registrant's press release dated April 21, 1999, regarding its
financial results for the period ended March 31, 1999, including unaudited
consolidated financial statements for the period ended March 31, 1999, are
attached.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Date: April 21, 1999
By: Mark Loughridge
------------------------------------
(Mark Loughridge)
Vice President and Controller
IBM Announces Record First Quarter Results
April 21, 1999
IBM today announced first-quarter 1999 diluted earnings per common share of
$1.55 compared with diluted earnings per common share of $1.06 in the first
quarter of 1998. First-quarter 1999 net income totaled $1.5 billion compared
with $1.0 billion in the first quarter of last year. First-quarter 1999 revenues
grew 15 percent (14 percent at constant currency) to $20.3 billion. IBM's
earnings-per-share, net income and revenue results were all first-quarter
records for the company.
Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said: "We
started 1999 with a strong quarter. We saw a significant improvement in our
business in Asia, and we also had double-digit revenue growth in Europe and the
Americas. Our operating results were excellent, led by services and software --
which together produced 60 percent of our gross profits this quarter. Our
Technology Group results were mixed, with growth in hard disk drives offset by
continued weakness in memory chips. Our PC unit also had substantially improved
results.
"What's more exciting, however, is that this quarter's performance is a direct
reflection of the power of the strategies we have put in place over the last few
years," Mr. Gerstner said. "Services is clearly the largest and fastest-growing
portion of the information technology industry, and we continue to extend our
leadership position each quarter. Our software business continues to gain
momentum. For example, we are now the number one database company in the world.
Our strategy of providing leading-edge technology to the marketplace received
substantial impetus this quarter as a result of major, long-term agreements we
announced with Dell and EMC. And finally, our strategy to reposition the
System/390 continued to move forward, with an increase of more than 80 percent
in MIPS shipments in the first quarter."
In as-reported terms, excluding revenues from the company's original equipment
manufacturer (OEM) business, first-quarter revenues from the Americas totaled
$8.8 billion, an increase of 13 percent (14 percent in constant currency)
compared with the first quarter of 1998. Revenues from Europe/Middle East/Africa
were $6.3 billion, up 20 percent (18 percent in constant currency). Revenues
from Asia-Pacific increased 20 percent (13 percent in constant currency) to $3.5
billion. OEM revenues totaled $1.8 billion in the first quarter of 1999, a 5
percent increase (5 percent in constant currency) compared with the year-earlier
period.
Total hardware revenues were $8.6 billion in the first quarter, an increase of
17 percent (16 percent in constant currency) from the first quarter of last
year. Revenues from personal systems increased significantly. Within servers,
System/390 revenues increased while RS/6000 and AS/400 revenues declined. Within
technology, storage revenues increased and microelectronics revenues declined.
Revenues from IBM Global Services, including maintenance, grew 19 percent (18
percent in constant currency) in the first quarter to $7.6 billion. Excluding
maintenance, services revenues increased 24 percent (23 percent at constant
currency) to $6.3 billion. IBM signed $9.8 billion in services contracts in the
first quarter and concluded the quarter with a total services contract backlog
of approximately $55 billion.
Software revenues increased 10 percent (9 percent in constant currency) in the
first quarter to $2.9 billion, with strong results from the company's database,
Lotus Notes and transaction processing products.
Revenues from Global Financing declined 2 percent in the first quarter to $705
million.
Revenues from the Enterprise Investments/Other area, which includes custom
applications and other products designed to meet specialized customer
requirements, decreased 6 percent (8 percent at constant currency) year over
year to $558 million.
IBM's overall gross profit margin was 35.7 percent in the first quarter compared
with 36.6 percent in the first quarter of last year.
The company's expense-to-revenue ratio improved 2.6 points year over year to
25.4 percent.
IBM's tax rate in the first quarter was 30.0 percent compared with 32.0 percent
in the year-earlier period.
IBM spent approximately $2.1 billion on share repurchases in the first quarter.
The average number of shares outstanding in the quarter was 911.9 million
compared with 950.2 million in the first quarter of 1998. There were 907.4
million common shares outstanding at March 31, 1999.
Debt in support of operations, excluding global financing, increased $1.1
billion from year-end 1998 to $2.8 billion. Global financing debt decreased $559
million from the end of 1998 to a total of $27.2 billion.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein,
statements included in this release may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements involve a number of risks, uncertainties and other factors that
could cause actual results to differ materially, as discussed in the company's
filings with the Securities and Exchange Commission.
Financial Results Attached
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three months ended March 31,
Percent
1999 1998 Change
------- ------- -------
REVENUE
Hardware $ 8,584 $ 7,318 17.3%
Gross profit margin 27.2% 28.7%
Global Services 7,550 6,341 19.1%
Gross profit margin 26.3% 27.0%
Software 2,920 2,644 10.4%
Gross profit margin 81.0% 79.6%
Global Financing 705 719 -1.9%
Gross profit margin 55.9% 47.1%
Enterprise Investments/Other 558 596 -6.4%
Gross profit margin 32.6% 33.1%
TOTAL REVENUE 20,317 17,618 15.3%
GROSS PROFIT 7,258 6,450 12.5%
Gross profit margin 35.7% 36.6%
OPERATING EXPENSES
S,G&A 3,937 3,719 5.8%
% of revenue 19.4% 21.1%
R,D&E 1,181 1,179 0.2%
% of revenue 5.8% 6.7%
OPERATING INCOME 2,140 1,552 37.9%
Other income 134 150 -10.7%
Interest expense 174 179 -3.0%
INCOME BEFORE
INCOME TAXES 2,100 1,523 37.9%
Pre-tax margin 10.3% 8.6%
Provision for
income taxes 630 487 29.3%
Effective tax rate 30.0% 32.0%
NET INCOME $ 1,470 $ 1,036 42.0%
Net margin 7.2% 5.9%
Preferred stock
dividends 5 5
NET INCOME
APPLICABLE TO COMMON
SHAREHOLDERS $ 1,465 $ 1,031 42.2%
======= =======
EARNINGS PER SHARE
OF COMMON STOCK
- BASIC $ 1.61 $ 1.08 49.1%
======= =======
EARNINGS PER SHARE
OF COMMON STOCK
- ASSUMING DILUTION $ 1.55 $ 1.06 46.2%
======= =======
AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)
BASIC 911.9 950.2
DILUTED 941.4 973.3
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited; Dollars in millions)
At At
March 31 December 31 Percent
1999 1998 Change
-------- ----------- -------
ASSETS
Cash, cash equivalents,
and marketable securities $ 5,356 $ 5,768 -7.1%
Receivables - net, inventories,
and prepaid expenses 34,445 36,592 -5.9%
Plant, rental machines,
and other property - net 18,866 19,631 -3.9%
Investments and other assets 23,084 24,109 -4.3%
------- -------
TOTAL ASSETS $81,751 $86,100 -5.1%
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $13,708 $13,905 -1.4%
Long-term debt 16,285 15,508 5.0%
------- -------
Total debt 29,993 29,413 2.0%
Accounts payable, taxes,
and accruals 19,573 22,922 -14.6%
Other liabilities 13,879 14,332 -3.2%
------- -------
TOTAL LIABILITIES 63,445 66,667 -4.8%
STOCKHOLDERS' EQUITY 18,306 19,433 -5.8%
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $81,751 $86,100 -5.1%
======= =======
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited; Dollars in millions)
FIRST QUARTER 1999
Hardware Segments
-------------------------------------------------
Personal Global
Technology Systems Server Services
---------- ------- ------- -------
External revenue $ 2,870 $ 3,589 $ 2,073 $ 7,550
Internal revenue 898 7 73 669
------- ------- ------- -------
Total revenue $ 3,768 $ 3,596 $ 2,146 $ 8,219
Pre-tax income $ 70 $ (89) $ 498 $ 973
Revenue year-to-
year change -0.1% 48.6% -3.1% 17.4%
Pre-tax income year-
to-year change -70.6% 80.6% -2.0% 33.8%
Pre-tax income margin 1.9% -2.5% 23.2% 11.8%
- --------------------------------------------------------------------------------
Global Enterprise Total
Software Financing Investments Segments
-------- --------- ----------- --------
External revenue $ 2,920 $ 724 $ 549 $20,275
Internal revenue 211 207 11 2,076
------- ------- ------- -------
Total revenue $ 3,131 $ 931 $ 560 $22,351
Pre-tax income $ 657 $ 297 ($ 72) $ 2,334
Revenue year-to-
year change 10.6% 5.1% 11.3% 13.9%
Pre-tax income year-
to-year change 10.4% 6.5% 52.0% 34.2%
Pre-tax income margin 21.0% 31.9% -12.9% 10.4%
- --------------------------------------------------------------------------------
Reconciliation to IBM As Reported
Revenue - eliminations/other (2,034)
IBM Revenue - as reported $ 20,317
========
Pre-tax income - eliminations/other (234)
IBM pre-tax income - as reported $ 2,100
========
- --------------------------------------------------------------------------------
FIRST QUARTER 1998
Hardware Segments
-------------------------------------------------
Personal Global
Technology Systems Server Services
---------- ------- ------- -------
External revenue $ 2,767 $ 2,414 $ 2,135 $ 6,341
Internal revenue 1,005 6 80 659
------- ------- ------- -------
Total revenue $ 3,772 $ 2,420 $ 2,215 $ 7,000
Pre-tax income $ 238 ($ 458) $ 508 $ 727
Pre-tax income margin 6.3% -18.9% 22.9% 10.4%
- --------------------------------------------------------------------------------
Global Enterprise Total
Software Financing Investments Segments
-------- --------- ----------- --------
External revenue $ 2,644 $ 725 $ 492 $17,518
Internal revenue 186 161 11 2,108
------- ------- ------- -------
Total revenue $ 2,830 $ 886 $ 503 $19,626
Pre-tax income $ 595 $ 279 ($ 150) $ 1,739
Pre-tax income margin 21.0% 31.5% -29.8% 8.9%
- --------------------------------------------------------------------------------
Reconciliation to IBM As Reported
Revenue - eliminations/other (2,008)
IBM Revenue - as reported $ 17,618
========
Pre-tax income - eliminations/other (216)
IBM pre-tax income - as reported $ 1,523
========
- --------------------------------------------------------------------------------