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, 1998
(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, 1998, regarding its
financial results for the period ended September 30, 1998, including
financial statements for the period ended September 30, 1998, are attached.
Under the terms of the registrant's By-laws, stockholders who intend
to present an item of business at the 1999 annual meeting of stockholders
(other than a proposal submitted for inclusion in the registrant's proxy
materials) must provide notice of such business to the registrant no earlier
than October 19, 1998 and no later than November 18, 1998, as set forth
more fully in such By-laws.
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: October 20, 1998
By: /s/ Mark Loughridge
------------------------------
(Mark Loughridge)
Vice President and Controller
IBM ANNOUNCES THIRD-QUARTER 1998 RESULTS
ARMONK, N.Y., October 20, 1998 . . . IBM today announced third-quarter
1998 diluted earnings per common share of $1.56 compared with diluted
earnings per common share of $1.35 in the third quarter of last year.
Third-quarter 1998 net earnings totaled $1.5 billion compared with $1.4
billion in the third quarter of 1997. Third-quarter 1998 revenues were $20.1
billion, an increase of 8 percent (11 percent at constant currency) over the
year-ago period.
Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said:
"As our results indicate, our business accelerated significantly in the third
quarter. We showed strong revenue and earnings growth and substantial
improvement across nearly all parts of our product line. In short, we
executed well on the strength of our broad portfolio of businesses.
"We're especially encouraged by across-the-board revenue growth in our
server group, by ongoing strength in our services and software businesses,
and by good improvement in our PC unit. At the same time, our semiconductor
business continued to be hit hard by a prolonged, industry-wide downturn in
memory chip prices.
"While IBM is entering the fourth quarter with some real momentum," Mr.
Gerstner said, "we are facing a number of significant short-term issues,
including an uncertain global economic environment, ongoing weakness in some
parts of Asia and Latin America, and continued price pressures in
semiconductors.
"Over the longer term, though, we believe we are exceptionally well
positioned as we move toward the next millennium. It's clear that customers
increasingly are embracing our technology strategies as they seek highly
integrated products and services to solve their business problems. We are
committed to providing these solutions while maintaining our focus on
delivering consistent financial results."
On an as-reported basis, third quarter revenues from North America were
$10.0 billion, an increase of 15 percent compared with the third quarter of
1997. Revenues from IBM's Europe/Middle East/Africa unit totaled $6.1
billion, up 16 percent (15 percent at constant currency). Asia-Pacific
revenues declined 16 percent (2 percent at constant currency) to $3.2
billion. Revenues from Latin America fell 6 percent (3 percent at constant
currency) to $840 million.
Total hardware sales grew 4 percent (6 percent at constant currency)
year over year to $8.7 billion. Personal computer revenues were flat.
RS/6000, AS/400 and System/390 revenues increased; within the System/390
line, total MIPS (millions of instructions per second) more than doubled.
Storage revenues increased and semiconductor revenues fell.
Services revenues were $5.8 billion, a rise of 23 percent (26 percent at
constant currency) over the third quarter of 1997. IBM Global Services signed
approximately $10 billion in new services contracts in the quarter. The
services gross profit margin increased 1 point year over year.
Overall software revenues totaled $3.2 billion, up 5 percent (8 percent
at constant currency) compared with the third quarter of 1997. Revenues grew
strongly in database, AS/400 and Tivoli systems management software. The
overall software gross profit margin rose 4.3 points to 74.6 percent.
Maintenance revenues were $1.4 billion, a decline of 8 percent (4
percent at constant currency) compared with the third quarter of last year.
Rentals and financing revenues increased 7 percent (9 percent at constant
currency) to $1 billion.
IBM's total gross profit margin was 37.2 percent in the third quarter
compared with 38.2 percent in the year-ago period.
Total third-quarter expenses increased 4 percent, due in large part to
investments in research and development to support the company's e-business
strategies. The company's expense-to-revenue ratio improved 1 point year over
year.
IBM spent approximately $1.7 billion on share repurchases in the third
quarter. The average number of common shares outstanding in the quarter was
928.4 million compared with 978.0 million during the same period of 1997.
There were 922.9 million shares outstanding at the end of the quarter.
The company's core debt (excluding global financing) declined $530
million from year-end 1997 to $2.6 billion. Debt supporting IBM's worldwide
credit operations increased $2.1 billion to $25.9 billion from $23.8 billion
at year-end 1997.
Net earnings for the nine months ended September 30, 1998 were $4.0
billion, or $4.11 per diluted common share, compared with net earnings of
$4.0 billion, or $3.91 per diluted common share, in the year-ago period.
Revenues for the nine months ended September 30, 1998 were $56.5 billion, an
increase of 3 percent (7 percent at constant currency) compared with $54.8
billion as of September 30, 1997.
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
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three Months Nine Months
Ended September 30, Ended September 30,
Percent Percent
1998 1997 Change 1998 1997 Change
------- ------- ------- ------- ------- -------
REVENUE
Hardware sales $8,700 $8,345 4.2% $23,343 $24,722 -5.6%
Gross margin 31.8% 33.8% 30.3% 34.0%
Services 5,771 4,709 22.6% 16,382 13,416 22.1%
Gross margin 21.3% 20.3% 21.4% 20.1%
Software 3,175 3,039 4.5% 9,421 9,073 3.8%
Gross margin 74.6% 70.3% 75.3% 70.0%
Maintenance 1,449 1,574 -8.0% 4,405 4,809 -8.4%
Gross margin 46.8% 46.8% 47.9% 46.7%
Rentals
and financing 1,000 938 6.7% 2,985 2,765 8.0%
Gross margin 42.4% 48.2% 43.1% 50.7%
TOTAL REVENUE 20,095 18,605 8.0% 56,536 54,785 3.2%
GROSS PROFIT 7,467 7,098 5.2% 21,063 21,091 -0.1%
Gross margin 37.2% 38.2% 37.3% 38.5%
OPERATING EXPENSES
S,G&A 4,057 3,932 3.1% 11,588 11,574 0.1%
% of revenue 20.2% 21.1% 20.5% 21.1%
R,D&E 1,240 1,162 6.7% 3,639 3,452 5.4%
% of revenue 6.2% 6.2% 6.4% 6.3%
OPERATING INCOME 2,170 2,004 8.3% 5,836 6,065 -3.8%
Other income 122 162 -25.0% 402 484 -16.9%
Interest expense 160 183 -12.6% 500 534 -6.3%
EARNINGS BEFORE
INCOME TAXES 2,132 1,983 7.5% 5,738 6,015 -4.6%
Pre-tax margin 10.6% 10.7% 10.1% 11.0%
Provision for
income taxes 638 624 2.3% 1,756 2,015 -12.8%
Effective tax
rate 30.0% 31.5% 30.6% 33.5%
NET EARNINGS $1,494 $1,359 9.9% $3,982 $4,000 -0.4%
Net margin 7.4% 7.3% 7.0% 7.3%
Preferred stock
dividends 5 5 15 15
NET EARNINGS
APPLICABLE TO COMMON
SHAREHOLDERS $1,489 $1,354 9.9% $3,967 $3,985 -0.4%
====== ====== ====== ======
NET EARNINGS PER
SHARE OF COMMON
STOCK - BASIC $1.60 $1.38 15.9% $4.22 $4.03 4.7%
====== ====== ====== ======
NET EARNINGS PER
SHARE OF COMMON
STOCK - ASSUMING
DILUTION $1.56 $1.35 15.6% $4.11 $3.91 5.1%
====== ====== ====== ======
AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)
BASIC 928.4 978.0 939.4 989.4
DILUTED 954.5 1,005.2 965.5 1,019.2
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited; Dollars in millions)
At At
September 30 December 31 Percent
1998 1997 Change
--------- ----------- -------
ASSETS
Cash, cash equivalents,
and marketable securities $5,869 $7,553 -22.3%
Receivables - net, inventories,
and prepaid expenses 32,933 32,865 0.2%
Plant, rental machines,
and other property - net 19,005 18,347 3.6%
Investments and other assets 21,912 22,734 -3.6%
-------- --------
TOTAL ASSETS $79,719 $81,499 -2.2%
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LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $13,237 $13,230 0.1%
Long-term debt 15,239 13,696 11.3%
-------- --------
Total debt 28,476 26,926 5.8%
Accounts payable, taxes,
and accruals 18,275 20,277 -9.9%
Other liabilities 14,333 14,480 -1.0%
-------- --------
TOTAL LIABILITIES 61,084 61,683 -1.0%
STOCKHOLDERS' EQUITY 18,635 19,816 -6.0%
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $79,719 $81,499 -2.2%
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