WASHINGTON, JULY 20: International Business Machines Corp. posted stronger-than-expected earnings for the second quarter on a 16% rise in revenue, fueled by across-the-board gains in services, hardware and software.IBM's net income rose 65% to $ 2.39 billion, or $ 1.28 a diluted share, from $ 1.45 billion, or 75 cents, in the year-earlier period. Excluding gains from the sale of its Global Network and one-time charges, IBM earned 91 cents a share - three cents better than a First Call/Thomson Financial consensus of analysts. Revenue rose to $ 21.91 billion from $ 18.82 billion. It was the second strong quarter in a row for the No. 1 computer maker, which is benefiting from heavy business investment in Internet infrastructure and rising demand for the design and integration of global systems."This is a much healthier business than people have expected it would be - that's the fundamental issue," said John B. Jones Jr., an analyst with Salomon Smith Barney Inc. Alluding to IBM's struggles of a few years ago, he said, "There's a lot of people who labored with this company and this stock . and just couldn't believe IBM could get its act back together."IBM announced its results after the close of stock markets. Its stock closed at $ 134.625, down $ 1.625, in composite New York Stock Exchange trading Monday. In after-hours trading, according to Instinet Inc., IBM rose to $ 136.IBM's computer-hardware business did especially well in the quarter, with revenue rising almost 22% to $ 9.38 billion. The flagship mainframe product line - including its new-generation System/390 - sold well to corporate customers for computing tasks that increasingly include processing for electronic commerce.In personal computers, IBM had a loss of $ 153 million in the quarter, narrowing from a loss of $ 436 million a year earlier. Revenue was up across the PC product line to $ 3.87 billion, a 50% rise, fueled by sales of many models, and especially laptops, IBM said. The company didn't break out laptop sales figures.Steven Milunovich, an analyst with Merrill Lynch & Co., called the results "solid" and a "replay of the first quarter," with IBM showing strength in software and services. He added that "the surprise was hardware."Although it is early in the earnings season for computer makers, IBM's results are expected to reflect a strong industry wide demand for computer servers, analysts said. IBM's results also reflect healthy growth in PC shipments after some concern earlier this year that PC sales were weakening. Competitive pricing, however, is keeping the PC sector unprofitable, said Don Young, an analyst with PaineWebber Inc.IBM's good showing was helped by relatively easy comparisons from the second quarter last year, when the company grappled with turmoil in Asia and weaker sales of PCs and mainframes.Analysts say that IBM is focusing its growth in the most fertile areas - in services, software and other technology - but they don't expect the computer giant to sustain the same level of revenue growth in the second half. For one thing, IBM faces tougher year-over-year comparisons. In addition, analysts expect a strong dollar to have a negative impact on revenue growth.The bottom line also is expected to slow, analysts say, due in part to customers' concerns about year-2000 computer snags that may prompt them to shun new computer installations until next year.
