IBM and Microsoft CFOs differ on 2002 outlook

IBM and Microsoft CFOs differ on 2002 outlook

IBM's chief financial officer says prospects for growth in 2002 remain 'good', but his counterpart at software giant Microsoft expects global PC sales to drop in the first half of the year.

John Joyce, IBM’s finance chief, said the underlying dynamics pointed to good growth in 2002 and called the average estimate of analysts for 2002 ‘reasonable’.

He said IBM had cut costs and should be able to improve results in its PC division, regardless of the economy. He also said the company’s customers remained cautious.

Joyce also said expected charges for write-downs in goodwill, pension costs, and equity holdings would not have a significant impact on 2002 earnings.

IBM’s net income was $2.33bn for the quarter ended 31 December, or $1.33 a share, down from $2.67bn, or $1.48 a share, a year earlier. Wall Street had expected $1.32 a share, according to analysts at First Call.

While sales declined, Joyce said IBM was able to meet its profit forecast in the recent quarter because products with high profit margins, including mainframes and software, performed beyond expectations.

But, Microsoft CFO John Connors said the company expected global PC sales to drop this quarter and next, compared with a previous forecast for shipments to rise.

He said Microsoft has not seen a rebound in any of the world’s major markets and poor PC sales in Japan were hurting demand for software.

‘PC demand is still below what we had hoped,’ Connors said. ‘When there is a recovery, it will be modest.’

Microsoft reported lower fiscal second-quarter net income and said sales this quarter would miss analyst targets because PC shipments are likely to fall.

Net income in the second quarter ended 31 December declined 13% to $2.28bn, or 41 cents a share, from $2.62bn, or 47 cents, a year earlier, excluding $660m in costs related to a planned settlement of a class-action lawsuit.

Without the legal charge, Microsoft profits would have been up 8% over the year-earlier period.

Revenues for the second quarter jumped 18 per cent to $7.74bn, compared with the $7.3bn project on average by analysts.

Connors warned investors not to get overly excited about the quarter’s sales increase. ‘While we are pleased with our results this quarter, we are concerned about the health of the global economy and have yet to see a recovery in many of the world’s largest markets.’

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