Beyond steadying its own stock, IBM Corp.'s solid results and positive outlook will serve to help steady the semi industry, research firm the Lehman Brothers reported.

Total Q2 revenue was $23.2 billion, up 7 percent year-over-year, on IBM's earnings per share of $1.16, compared with 98 cents per share in the same period of 2003. Big Blue saw sales growth in four out of five business groups, noting particularly strong increases in financial services and industrial sectors, as well as in small and medium businesses. By major segment, global services revenues were $11.3 billion, up 1.8 percent quarter-over-quarter; hardware revenues were $7.4 billion, up 10.4 percent quarter-over-quarter; and software revenues were sequentially flat at $3.5 billion.

Mark Loughridge, IBM’s senior VP and CFO, pointed out that IBM's zSeries growth on saw year-to-year revenue growth of 44 percent on MIPS growth of 75 percent. "This is the fourth consecutive quarter of revenue growth following the z990 introduction last year," he said on Q2 conference call.

"Solid Hardware revenues were led by strong sales of zSeries, as well as Intel-based Xeon xSeries servers, while personal systems revenues were $3.2 billion (up 12.3 percent quarter-over-quarter) on solid IBM ThinkPad notebook and PC shipments, all likely to be viewed as constructive for semi bellwether Intel," Tim Luke, a Lehman managing director, said in a research note late Thursday. "Management noted that in general hardware component prices were very stable during the quarter, although, prices for LCDs and memory trended up slightly. Management expects fairly stable component pricing in 2H04, which is in line with our view that inventory re-balancing continues at this stage across several semiconductor component categories."

IBM gave further good news in its Q2 results Thursday, saying that the technology group's OEM revenue increased $701 million as yields and manufacturing improvements took hold at its East Fishkill, N.Y., plant. Fab output, IBM said, doubled at the 300mm location in the June quarter.

"Management noted that 300mm fab output doubled quarter-over-quarter in Q2 and has the potential to double again in Q3," Luke said. "In general, we view IBM's forecast for improving efficiencies/higher output as constructive and we note that CDMA pioneer Qualcomm is one of IBM's key fabless customers."

Looking ahead, Loughridge said IBM should meet analyst estimates for the year. "We continue to see the IT industry growth around 4 to 5 percent, which is the best it has been since 2000," he said. "Customer spending continues to improve, though not uniformly across all segments and regions. This is nothing new. Demand is not entirely predictable or consistent, and it evolves with customer requirements."

Lehman's Luke put estimates at $96.3 billion and $4.95 EPS for 2004.

"We remain encouraged by management's constructive tone and their estimates for 'IT industry growth of approximately 4 to 5 percent,'" Luke said.  "Management noted that customer spending continues to improve though not uniformly across all segments and regions, which is consistent with our view that corporate IT spending continues to improve at a steady if measured pace."

By: DocMemory
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