10-QPeriod: Q3 FY2002

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q3 Ended Sep 30, 2002

Filed November 4, 2002For Securities:IBM

Summary

IBM's third quarter 2002 report shows resilience in a challenging economic environment, with total revenue holding steady year-over-year. While hardware sales experienced a decline, this was largely offset by growth in Global Services and a slight increase in Software revenue. The company also made significant strategic moves, including the agreement to acquire PricewaterhouseCoopers' consulting arm, aimed at strengthening its position in the technology services market. Despite some revenue headwinds in specific segments and increased provision for doubtful accounts, IBM demonstrated cost discipline and efficiency gains from prior restructuring actions. The divestiture of the Hard Disk Drive (HDD) business continues to impact reported results negatively due to ongoing losses and estimated disposal costs. Overall, the company navigated a complex economic landscape by focusing on strategic acquisitions and cost management, positioning itself for future growth.

Key Highlights

  • 1Total revenue for the third quarter of 2002 remained flat at $19.82 billion, demonstrating stability amidst a difficult economic climate.
  • 2Global Services revenue saw a 2.4% increase year-over-year, reaching $8.89 billion, driven by Strategic Outsourcing and Integrated Technology Services.
  • 3Hardware revenue declined by 1.0% to $6.76 billion, primarily due to decreases in iSeries, zSeries servers, and storage products, though the rate of decline slowed compared to previous quarters.
  • 4Software revenue experienced a slight decrease of 2.9% to $3.11 billion, but the company anticipates market share gains.
  • 5IBM announced and completed the acquisition of PricewaterhouseCoopers' (PwC) global business consulting and technology services unit for approximately $3.5 billion, significantly expanding its consulting capabilities.
  • 6The company is actively managing costs, with SG&A and RD&E expenses decreasing year-over-year, and benefiting from prior restructuring actions.
  • 7The discontinued Hard Disk Drive (HDD) business continued to report losses, with a net loss of $381 million for the quarter, including estimated disposal costs.

Frequently Asked Questions

IBM's total revenue for the third quarter of 2002 was $19.82 billion, which was flat compared to the same period in 2001. This stability was achieved despite challenging economic conditions.

Global Services revenue increased by 2.4%, supported by Strategic Outsourcing and Integrated Technology Services. Hardware revenue saw a slight decline of 1.0%, impacted by servers and storage. Software revenue decreased by 2.9%, although market share gains are anticipated. Global Financing revenue also declined by 3.2%.

The most significant strategic action was the agreement to purchase PricewaterhouseCoopers' (PwC) global business consulting and technology services unit for approximately $3.5 billion, which was completed on October 1, 2002. This acquisition is expected to bolster IBM's consulting and technology services offerings.

The HDD business is reported as discontinued operations and continues to incur losses. For the third quarter of 2002, the loss from discontinued operations was $381 million, which included operational losses and an additional estimated loss on disposal. This negatively impacts the overall reported net income.