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: October 20, 1997
(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 October 20, 1997, regarding its
financial results for the period ended September 30, 1997, including
unaudited consolidated financial statements for the period ended September
30, 1997, 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.
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Registrant)
Date: October 20, 1997
By: John R. Joyce
______________________________
(John R. Joyce)
Vice President and Controller
IBM Announces Third-Quarter 1997 Results
October 20, 1997
IBM today announced third-quarter 1997 net earnings of $1.4 billion, or $1.38
per common share, compared with net earnings of $1.3 billion, or $1.23 per
common share, in the third quarter of last year. Third-quarter 1997 revenues
increased 3 percent (8 percent at constant currency) year over year to $18.6
billion.
Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said: "This
quarter saw a continuation of trends that have been evident the last several
quarters. We showed continued strength in services, System/390 servers,
commercial PCs, and Lotus Notes and Tivoli distributed software. At the same
time, there was ongoing weakness in consumer PCs and two of our key server
products -- the RS/6000 and the AS/400 -- were undergoing major transitions.
Currency had a significant adverse impact on our results. Despite these
negative factors, however, we were able to show good earnings and constant
currency revenue growth because of our broad and diversified product and
services portfolio. In short, our results were consistent with our long-term
business and financial model.
We also made good progress in the quarter in strengthening our product line
to help our customers do business through network computing and the Internet
- --what we call 'e-business.' These new products -- including PCs, RS/6000s,
AS/400s and a new family of network computers -- make it easier for customers
to access the Internet and use advanced network applications as well as
Java-based applications.
In addition, our research and development teams have made a number of
particularly noteworthy announcements in recent months," Mr. Gerstner said.
"We achieved a major technology breakthrough in the development of so-called
'copper chips,' which will result in far more powerful and cost-effective
computers and other electronic devices. We introduced a new hard disk drive
for desktop PCs that holds 8.4 gigabytes of data -- four times as much
information as the average disk drive. We also began shipping a low-cost
speech recognition program that lets customers easily dictate information to
their desktop computers."
On an as-reported basis, third-quarter revenues from North America were $8.7
billion, an increase of 7 percent from the same period of 1996. Asia-Pacific
revenues grew 7 percent to $3.8 billion and revenues from Latin America
increased 10 percent to $891 million. Revenues from the company's
Europe/Middle East/Africa unit declined 6 percent to $5.2 billion.
Total hardware sales were flat year over year at $8.3 billion. Commercial PC
and PC server revenues increased, while consumer PC sales declined. RS/6000
revenues were essentially flat while AS/400 revenues declined. System/390
revenues were flat due to year over year price declines, although System/390
shipments grew significantly in the quarter. Storage product revenues
increased, as did revenues from the company's semiconductor unit,
IBM Microelectronics.
Services revenues were $4.7 billion, a 20 percent increase from the third
quarter of 1996. Approximately $9 billion in new services contracts were
signed in the quarter. Services gross margins increased 2 points year over
year.
Overall software revenues were $3.0 billion, a decline of 2 percent compared
with last year's quarter. Distributed software revenues increased, led by
offerings from IBM's Lotus and Tivoli units. During the quarter, IBM began
shipping new versions of its Lotus Notes and Domino products, including the
Domino Intranet Starter Pack," which allows small- and medium-sized
businesses to cost-effectively and quickly achieve collaboration over the
World Wide Web. IBM also began shipping DB2 Universal Database, a
next-generation data management system that allows many different kinds of
information -- videos, digital images, text and spreadsheets -- to be used
easily on the Internet. In addition, IBM announced its intention to acquire
Unison Software, Inc., a leading developer of distributed systems management
tools.
Maintenance revenues fell 9 percent to $1.6 billion compared with the
third-quarter of 1996, while revenues from rentals and financing were flat at
$938 million.
In constant currency terms, Asia-Pacific revenues increased 15 percent and
Europe/Middle East/Africa revenues grew 6 percent. In addition, also on a
constant currency basis, hardware revenues increased 4 percent, services
revenues grew 26 percent, software revenues increased 5 percent, maintenance
revenues declined 3 percent and rentals and financing revenues grew 5 percent.
IBM's total gross profit margin was 38.2 percent in the third quarter of 1997
compared with 40.2 percent in the same period of 1996
Total third-quarter 1997 expenses declined 3 percent, largely as a result of
a 6 percent drop in selling, general and administrative expenses. Research,
development and engineering expenses rose 4 percent.
The company's tax rate was 31.5 percent in the third quarter compared with
35.1 percent in the third quarter of last year.
IBM spent approximately $1.6 billion on share repurchases in the third
quarter. The average number of common shares outstanding in the quarter was
978.0 million compared with 1,043.7 million during the same period of last
year. There were 972.2 million shares outstanding at the end of the quarter.
The company's core debt (excluding customer financing) increased $525 million
from year-end 1996 to $2.7 billion. Debt supporting IBM's worldwide credit
operations increased $2.8 billion to $23.4 billion from $20.6 billion at
year-end 1996.
Net earnings for the nine months ended September 30, 1997 were $4.0 billion,
or $4.03 per common share, compared with net earnings of $3.8 billion, or
$3.59 per common share, in the first nine months of 1996. The nine-month
1996 figure excludes a
charge associated with research and development related to acquisitions in
the first quarter of 1996. Including this charge, net earnings for the first
nine months of 1996 were $3.4 billion, or $3.18 per common share. Revenues
for the nine months ended September 30, 1997 were $54.8 billion, an increase
of 4 percent (8 percent at constant currency) from the prior year's $52.8
billion.
Forward Looking and Cautionary Statements
Except for the historical information and discussions contained herein,
statements contained 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
SUPPLEMENTAL SCHEDULE - COMPARATIVE FINANCIAL RESULTS
(EXCLUDES EFFECT OF PURCHASED R&D FOR NINE MONTHS 1996)*
(Unaudited; Dollars in millions except per share amounts)
Three Months Nine Months
Ended September 30, Percent Ended September 30, Percent
1997 1996 Change 1997 1996 Change
------- ------- ------- ------- ------- -------
REVENUE
Hardware sales $8,345 $8,372 -0.3% $24,722 $24,656 0.3%
Gross margin 33.8% 36.9% 34.0% 35.1%
Services 4,709 3,932 19.7% 13,416 10,864 23.5%
Gross margin 20.3% 18.1% 20.1% 19.4%
Software 3,039 3,102 -2.1% 9,073 9,334 -2.8%
Gross margin 70.3% 68.2% 70.0% 68.9%
Maintenance 1,574 1,723 -8.7% 4,809 5,226 -8.0%
Gross margin 46.8% 47.5% 46.7% 47.7%
Rentals
and financing 938 933 0.6% 2,765 2,724 1.5%
Gross margin 48.2% 55.8% 50.7% 56.3%
TOTAL REVENUE 18,605 18,062 3.0% 54,785 52,804 3.8%
GROSS PROFIT 7,098 7,258 -2.2% 21,091 21,218 -0.6%
Gross margin 38.2% 40.2% 38.5% 40.2%
OPERATING EXPENSES
S,G&A 3,932 4,175 -5.8% 11,574 11,761 -1.6%
% of revenue 21.1% 23.1% 21.1% 22.3%
R,D&E 1,162 1,115 4.2% 3,452 3,322 3.9%
% of revenue 6.2% 6.2% 6.3% 6.3%
OPERATING INCOME 2,004 1,968 1.9% 6,065 6,135 -1.1%
Other income 162 183 -11.8% 484 526 -8.1%
Interest expense 183 172 6.3% 534 526 1.4%
EARNINGS BEFORE
INCOME TAXES 1,983 1,979 0.2% 6,015 6,135 -1.9%
Pre-tax margin 10.7% 11.0% 11.0% 11.6%
Provision for
income taxes 624 694 -10.1% 2,015 2,294 -12.2%
Effective tax
rate 31.5% 35.1% 33.5% 37.4%
NET EARNINGS * $1,359 $1,285 5.8% $4,000 $3,841 4.2%
Net margin 7.3% 7.1% 7.3% 7.3%
Preferred stock
dividends 5 5 15 15
NET EARNINGS
APPLICABLE TO COMMON
SHAREHOLDERS $1,354 $1,280 5.8% $3,985 $3,826 4.2%
====== ====== ====== ======
NET EARNINGS PER
SHARE OF COMMON
STOCK $ 1.38 $ 1.23 12.2% $ 4.03 $ 3.59 12.3%
====== ====== ====== ======
AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's) 978 1,043.7 989.4 1,066.7
* Supplemental information provided for comparative purposes: Net earnings
for the nine months 1996 excludes a $435 million non-recurring, non-tax
deductible charge for purchased in-process research and development in
connection with the Tivoli Systems Inc. and Object Technology International
Inc. acquisitions in March 1996.
Note: All references to the average number of common shares and per common
share data for all periods presented reflect a 2-for-1 stock split of the
common stock effective May 9, 1997.
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three Months Nine Months
Ended September 30, Percent Ended September 30, Percent
1997 1996 Change 1997 1996 Change
------- ------- ------- ------- ------- -------
REVENUE
Hardware sales $8,345 $8,372 -0.3% $24,722 $24,656 0.3%
Gross margin 33.8% 36.9% 34.0% 35.1%
Services 4,709 3,932 19.7% 13,416 10,864 23.5%
Gross margin 20.3% 18.1% 20.1% 19.4%
Software 3,039 3,102 -2.1% 9,073 9,334 -2.8%
Gross margin 70.3% 68.2% 70.0% 68.9%
Maintenance 1,574 1,723 -8.7% 4,809 5,226 -8.0%
Gross margin 46.8% 47.5% 46.7% 47.7%
Rentals
and financing 938 933 0.6% 2,765 2,724 1.5%
Gross margin 48.2% 55.8% 50.7% 56.3%
TOTAL REVENUE 18,605 18,062 3.0% 54,785 52,804 3.8%
GROSS PROFIT 7,098 7,258 -2.2% 21,091 21,218 -0.6%
Gross margin 38.2% 40.2% 38.5% 40.2%
OPERATING EXPENSES
S,G&A 3,932 4,175 -5.8% 11,574 11,761 -1.6%
% of revenue 21.1% 23.1% 21.1% 22.3%
R,D&E 1,162 1,115 4.2% 3,452 3,757 -8.1%
% of revenue 6.2% 6.2% 6.3% 7.1%
OPERATING INCOME 2,004 1,968 1.9% 6,065 5,700 6.4%
Other income 162 183 -11.8% 484 526 -8.1%
Interest expense 183 172 6.3% 534 526 1.4%
EARNINGS BEFORE
INCOME TAXES 1,983 1,979 0.2% 6,015 5,700 5.5%
Pre-tax margin 10.7% 11.0% 11.0% 10.8%
Provision for
income taxes 624 694 -10.1% 2,015 2,294 -12.2%
Effective tax
rate 31.5% 35.1% 33.5% 40.3%
NET EARNINGS * $1,359 $1,285 5.8% $4,000 $3,406 17.5%
Net margin 7.3% 7.1% 7.3% 6.4%
Preferred stock
dividends 5 5 15 15
NET EARNINGS
APPLICABLE TO COMMON
SHAREHOLDERS $1,354 $1,280 5.8% $3,985 $3,391 17.5%
====== ====== ====== ======
NET EARNINGS PER
SHARE OF COMMON
STOCK $ 1.38 $ 1.23 12.2% $ 4.03 $ 3.18 26.7%
====== ====== ====== ======
AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's) 978 1,043.7 989.4 1,066.7
* Net earnings for the nine months 1996 includes a $435 million
non-recurring, non-tax deductible charge for purchased in-process research
and development in connection with the Tivoli Systems Inc. and Object
Technology International Inc. acquisitions in March 1996. Net earnings
excluding the charge were $3,841 million, or $3.59 per common share.
Note: All references to the average number of common shares and per common
share data for all periods presented reflect a 2-for-1 stock split of the
common stock effective May 9, 1997.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited; Dollars in millions)
At At
September 30 December 31 Percent
1997 1996 Change
------------ ----------- -------
ASSETS
Cash, cash equivalents,
and marketable securities $6,486 $8,137 -20.3%
Receivables - net, inventories,
and prepaid expenses 31,704 32,558 -2.6%
Plant, rental machines,
and other property - net 17,921 17,407 3.0%
Investments and other assets 22,182 23,030 -3.7%
------- -------
TOTAL ASSETS $78,293 $81,132 -3.5%
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $12,518 $12,957 -3.4%
Long-term debt 13,623 9,872 38.0%
------- -------
Total debt 26,141 22,829 14.5%
Accounts payable, taxes,
and accruals 18,072 21,043 -14.1%
Other liabilities and
deferred income taxes 14,324 15,632 -8.4%
------- -------
Total liabilities 58,537 59,504 -1.6%
Stockholders' equity 19,756 21,628 -8.7%
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $78,293 $81,132 -3.5%
======= =======