IBM 're-ignites' sales with services business

IBM's second-quarter earnings suggest its services business is compensating for disappointing PC sales.

IBM's second-quarter earnings suggest its services business is compensating for disappointing PC sales. Overall, it reported turnover of $21.6bn (£14.2bn), down 1.2 per cent compared with the same quarter last year.

John Joyce, IBM's chief financial officer, blamed currency fluctuations and the loss of year 2000 revenue for the decline in turnover. Lou Gerstner, chief executive of IBM, said the numbers were in line with expectations and that IBM's services business has been "re-ignited". Big Blue has secured more than $20bn of new service business in the quarter.

IBM's PC business has been on the ropes for several quarters, said Joyce.

The $100m improvement in profitability year on year during the second quarter was still below the expectations of IBM's senior management.

Its hard drive business also dropped off by $250m during the quarter.

To improve its PC business, IBM plans to sell 35 per cent direct by the end of the year, said Joyce. In the last quarter, IBM sold 24 per cent of its $4bn worth of PC and PC-related products direct.

The future of the company is in ecommerce and related services, which increasingly favour the bigger players, said Joyce. The vendor's Websphere middleware business increased by 200 per cent year on year.

Meanwhile, IBM said its strategic ebusiness services increased 70 per cent against the same quarter a year earlier.

"Many dotcom companies have found they just can't do the heavy lifting that is required to get enterprise-wide ebusinesses running," Joyce said.