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International Business Machines Corp. further
roiled a queasy week on
Wall Street with a surprise announcement that its first-quarter earnings
fell below analysts' expectations, hurt by an inability to close sales and
higher pensions expenses.
In response, the company on Thursday hinted at a
"sizable restructuring," with a published report saying IBM will slash
thousands of
jobs in Europe.
The IBM report, initially slated for Monday, comes at a tough time for
investors: The Dow Jones Industrial average hit a five-month low Thursday,
while the tech-laden Nasdaq Composite Index dropped to its lowest point in
six months.
Investors sent IBM shares down nearly 4 percent in the late trading
session Thursday, and were poised for further selling on Friday.
"This quarter did not play out as we expected," said Mark Loughridge,
the company's chief financial officer, who said IBM has begun to address
weaknesses in sales.
"A couple of those actions may require some sizable restructuring
activities, primarily designed to move decision making closer to the
customer," he said. Details of the restructuring will come within the next
three months, he said.
The Wall Street Journal reported late Thursday that IBM plans to cut
several thousand jobs in Europe, citing a person familiar with the matter.
The company has told employees that it will close two sites in Germany and
five in Sweden and transfer the work to lower-cost operations in Eastern
Europe, the newspaper reported.
Analysts' estimates for the second half of the year "remain
reasonable," Loughridge said.
The company's first-quarter net income rose 3 percent to $1.40 billion,
or 84 cents per share, from $1.36 billion, or 79 cents per share, a year
ago. Earnings from continuing operations totaled $1.41 billion, or 85
cents per share, including stock-based compensation expenses.
Analysts surveyed by Thomson Financial were looking for the company to
earn 90 cents per share on sales of $23.65 billion.
Revenue grew 3.3 percent to $22.91 billion from $22.18 billion last
year, driven by the weak dollar. After adjusting for currency
translations, sales increased only 1 percent.
IBM said the quarter was going well until the last two weeks in March,
when revenue, especially from small transactions, dropped.
(Agencies) | 
Updated: 2005-04-15 14:30
