IBM Q1 Revenues Seen Flat Due to Lingering Y2K Spending Slowdowngreenspun.com : LUSENET : TB2K spinoff uncensored : One Thread
Friday April 14 5:07 PM ET
IBM Q1 Revenues Seen Flat, Even As Rival Sun Soars
By Nicole Volpe
NEW YORK (Reuters) - International Business Machines Corp. (NYSE:IBM - news), the world's largest computer maker, is expected to show almost no revenue growth when it reports its first quarter results next week, largely due to a lingering slowdown in spending among customers bracing for the Year-2000 date change.
While IBM wasn't the only computer maker affected by Y2K, the slack growth at Big Blue stood out in sharp contrast to rival Sun Microsystems Inc. (NasdaqNM:SUNW - news), which on Thursday reported its revenues soared 35 percent.
``With weak hardware sales adversely impacting services and software growth, IBM may grow overall revenue by less than our first quarter forecast of 2 percent,'' said Wit Soundview analyst Gary Helmig.
Corporate capital spending on computers generally failed to return immediately after the one-time millennium date change, as many had hoped. Analysts appear uncertain as to when corporate customers would resume spending. . . .
While analysts have seen signs that IBM's business began to pick up toward the end of the quarter, officials of the Armonk, N.Y.-based company have cautioned that healthy double-digit revenue growth is unlikely until the second half of 2000.
``IBM customers had been through two years of excruciating work, testing, testing, testing,'' said Jones. ``For IBM customers, Y2K was a dramatically different process (than for Sun or other computer makers' customers).''
Sun, a 15-year-old company, sells a variety of computer systems that had few problems handling the Year 2000 date change. By contrast, IBM has mainframe computer customers going back decades, resulting in knottier computer upgrade issues.
IBM also faces a tough comparison compared to the first and second quarters of 1999, when corporate customers spent heavily on new computers in advance of the Year 2000 transition and the freeze on new installations that occurred late last year.
``Are things getting better? Yes,'' said Robertson Stephens analyst Dan Niles. ``Are they taking longer than expected? Yes. I don't see a lot of revenue growth until the second half.''
Analysts said they expected IBM to meet the analyst consensus estimate of $0.78 published by First Call/Thomson Financial, which tallies analysts estimates. . . .
-- (M@rket.trends), April 18, 2000
Unisys revenue falls on Y2K sales slump
-- ($@$.$), April 18, 2000.
When you go to work you get paid for the work you do.
When you invest in the stock market you are taking a chance on gaining a profit from the work the company does.
When you buy stock you are not given an iron clad guarantee of a profit. You are making an investment in the product the company produces. If they produce well and make a profit, you make a profit on your investment. If they do not make a profit, neither do you.
The attitude of the last 20 years has been geared to instant gratification in America, driven largely to our commercialized culture. Buy our product and you will instantly receive gratification. All you need is that and the other thing to become the person you see in our ad.
It is disgusting to see how people are manipulated from the time they are toddlers to believe that they lack as a person unless they own the things.
Commercials tell us we are lacking, that we are inadequate, that we are NOT ok, but they can help us fix that by buying what they have to offer. Commercials tell children that their parents are fools, that our spouses are idiots that we can compensate for with their products. They teach males from early childhood that being aggressive and focusing on the female crotch and breasts will make them a "man". Females are taught that soft and sweet and coloring their hair and wearing jewelry and cooking in their little ovens, nurturing their little dolls, just to turn around and hand them a Barbie doll with a body they are physically incapable of emulating in real life.
Here we train the boy children that with the car they can then get a female like the one in the advertisement. The female, of course, has a body as close to a Barbie doll as is humanly possible. The girls are shown that all they need is the "looks" of a Barbie and they will get whatever they want.
Are children are set up to fail from the beginning.
I saw an add the other day, a car advertisement. What caught my attention was the crotch of a women, her legs spread, coming toward the camera. It was a car commercial. They said "XXX car company, proud sponsor of the 2000 Olympics". (Or "the car of the olympics" or something close). The woman was supposedly doing the long jump. She was "jumping" over the car. What do you think children saw? Proud sponsorship of our Olympic athletes? Hell no, the boys saw a crotch shot, the girls saw the dehumanization of their body, prostituted for sole purpose of profit for a car company. A car company who's product's standards have gone to hell in a hand basket for the past 30 years. A vehicle that is so flimsy that a big wheel running into it can cause a thousand dollars worth of damage and not only does not protect the people riding within it, but actually is built in such a way that people are killed or maimed in ways that did not occur in vehicles built 30 years ago.
Spend an hour or two watching children's TV. Look at the message your kids are getting. Even stations such as Nickelodeon are sending messages to children that would not have been allowed even in adult programming 20 years ago.
I do not think it is cute to see little kids dancing and thrusting their pelvises out in a sexual manner.
And people are shocked to see 12 year old girls pregnant.
To get back on my original subject *grin* (got a little carried away there), The attitude that by investing in the stock market guarantees you a profit is incorrect. It was laughable to see the big market increases in tech stock and dot coms. When Apple was starting they needed investors and there was no guarantee that they would produce what they were attempting to produce. Investing in them was investing in the possibility that they would be able to make a computer that individuals could own. The people who invested in them were not the big wall street companies, they didn't like to take chances like that. It was individuals who took a chance and they won. The same with Microsoft, Amazon and others. Suddenly there were hundreds, thousands of other start-ups attempting to accomplish the same thing. The problem is that suddenly "instant gratification" groupies jumped on the band wagon and expected every Tom, Dick, and Mary start-up to go ballistic and make them instant millionaires.
Then people got just plain stupid and copped the attitude that somehow they were "owed" a profit.
The most horrific example is HMO's.
The attitude of the HMO's in the name of profit for their investors is not unlike Hitler's actions against the Jewish people.
Individual lives mean little or nothing in the name of profit. During one of the newsmagazine exposi's, a spokesperson for an HMO said, in reply to a question about the lack of adequate medical care in one situation, "Our investors expect a profit".
Where newborn babies and their mothers were getting sent home in less than 24 hours after a birth, 70 year old women were being sent home 6 hours after a mastectomy, where normal tests are denied, causing people to die from illnesses that could have been prevented had the tests been done in a timely manner, the main action of HMO's is for the profit of their investors.
Personally I hope the frickin stock market crashes and all of those "profit demanding" investors who have piled their money into stocks, raising the price many times over the realistic profitability of what they are worth, end up on the street homeless. Instead of demanding that they be given something for nothing, they might have to learn to earn a living.
If the stock market goes down below 10 thousand or even 8 thousand, that will not be a crash, that will be the market going to where is should have been the entire time.
And when it does, yes, the price of gold (and silver) will go up. Simply because those who have been so dumb in the market will be scared shitless and will invest in Gold (etc.), trying to save what little of their asses they have left.
-- Cherri (firstname.lastname@example.org), April 18, 2000.
As Alan Greenspan said in the testimoney that Ken Decker refers to in the post above;
This decade is strewn with examples of bright people who thought they had built a better mousetrap that could consistently extract an abnormal return from financial markets. Some succeed for a time. But while there may occasionally be misconfigurations among market prices that allow abnormal returns, they do not persist. Indeed, efforts to take advantage of such misalignments force prices into better alignment and are soon emulated by competitors, further narrowing, or eliminating, any gaps.
No matter how skillful the trading scheme, over the long haul, abnormal returns are sustained only through abnormal exposure to risk.
It was very interesting reading, the double talk to justify bailing out the "private-sector refinancing of the large hedge fund, Long-Term Capital Management (LTCM)".
Odd how they made sure that those who invested in risky funds were able to get a cut of the pie when it was bailed out. Oh, and the logic he used to explain why they should not be held responsibe for their mistakes, how important it was that they be "helped" through the losses they brought upon themselves, yet when they were making money hand over fist, they were not inclined to "help" others to their profits.
TCM is a hedge fund, or a mutual fund that is structured to avoid regulation by limiting its clientele to a small number of highly sophisticated, very wealthy individuals and that seeks high rates of return by investing and trading in a variety of financial instruments. Since its founding in 1994, LTCM has had a prominent position in the community of hedge funds, in part because of its assemblage of talent in pricing and trading financial instruments, as well as its large initial capital stake. In its first few years of business, it earned an enviable reputation by racking up a string of above-normal returns for its investors. Yet when they screwed up, "this small group of unregulated, very wealthy individuals" were bailed out.
And senior citizens have to choose between eating and buying life saving medications. I am beginning to think TEOTWAWKI might just end up happening for some people after all. Hopefully a small group of unregulated, very wealthy individuals. **smirk**
Y2K has an effect on the market in many ways, do any investers realize it?
So much money was spent of Y2K remediation, on testing for Y2K problems, on new equipment in many cases, and in some updating equipment as well as software for the future along with Y2K. Less money was spent on new projects and a lot of projects were put on hold until everything with Y2K was over with. When companies spend money on making sure their equipment worked instead of investing it in profit making ventures, the money spent not bringing any return (due to remediation) then profits should be down if non-existant from the whole ordeal. Financial markets operate efficiently only when participants can commit to transactions with reasonable confidence that the risk of nonpayment can be rationally judged and compensated for.
Fear, whether irrational or otherwise, grips participants and they unthinkingly disengage from risky assets in favor of those providing safety and liquidity.
Quickly unwinding a complicated portfolio that contains exposure to all manner of risks, such as that of LTCM, in such market conditions amounts to conducting a fire sale. The prices received in a time of stress do not reflect longer-run potential, adding to the losses incurred. Of course, a fire sale that transfers wealth from one set of sophisticated market players to another, without any impact on the financial system overall, should not be a concern for the central bank. Moreover, creditors should reasonably be expected to put some weight on the possibility of a large market swing when making their risk assessments.
The scale and scope of LTCM's operations, which encompassed many markets, maturities, and currencies and often relied on instruments that were thinly traded and had prices that were not continuously quoted, made it exceptionally difficult to predict the broader ramifications of attempting to close out its positions precipitately. That its mistakes should be unwound and losses incurred was never open to question.
It was the judgment of officials at the Federal Reserve Bank of New York, who were monitoring the situation on an ongoing basis, that the act of unwinding LTCM's portfolio in a forced liqudiation would not only have a significant distorting impact on market prices but also in the process could produce large losses, or worse, for a number of creditors and counterparties,(who were aware that they were at risk, yet took that risk at the possibility of big profits) and for other market participants who were not directly involved with LTCM. How many "retirement funds" were invested in these risky ventures without the knowledge of the participants?
officers of the Federal Reserve Bank of New York contacted a number of creditors and asked if there were alternatives to forcing the firm into bankruptcy.
The troubles of LTCM were not a complete surprise to its counterparties.
Still, creditors as a whole most likely underestimated the size and scope of the market bets that LTCM was undertaking, an issue that is currently under review.
On September 23, the private sector parties arrived at an agreement providing a capital infusion of about $3-1/2 billion in return for substantially diluting existing shareholders' stake in LTCM.
And with markets currently volatile and investors skittish, putting a special premium on the timely resolution of LTCM's problems seemed entirely appropriate as a matter of public policy.
Any action by the government that prevents some of the negative consequences to the private sector of the mistakes it makes raises the threshold of risks market participants will presumably subsequently choose to take. Over time, economic efficiency will be impaired as some uneconomic investments are undertaken under the implicit assumption that possible losses may be borne by the government.In otherwords, if the government helps bail out one entity who takes stupid risks in the hope of a big payoff, others will take just as stupid, if not stupider risks under the assumption the government will bail them out also. Could this possibly be the reason why the market has gone sky high since LTCM's bailout?
To be sure, investors wiped out in a fire sale will clearly be less risk prone than if their mistakes were unwound in a more orderly fashion. In strait talk, if they have to eat their losses, they won't be as likely to take such stupid risks again, bail them out and they will make the same mistakes again.
But is the broader market well served if the resulting fear and other irrational judgments govern the degree of risk participants are subsequently willing to incur? Risk taking is a necessary condition for wealth creation. The optimum degree of risk aversion should be governed by rational judgments about the market place, not the fear flowing from fire sales.
quently willing to incur? Risk taking is a necessary condition for wealth creation. The optimum degree of risk aversion should be governed by rational judgments about the market place, not the fear flowing from fire sales. The Federal Reserve provided its good offices to LTCM's creditors, not to protect LTCM's investors, creditors, or managers from loss, but to avoid the distortions to market processes caused by a fire-sale liquidation and the consequent spreading of those distortions through contagion. To be sure, this may well work to reduce the ultimate losses to the original owners of LTCM, but that was a byproduct, perhaps unfortunate, of the process.
the creditors of LTCM apparently also understood the importance of some cushioning of the losses to the owners and managers of the firm.
No matter how skillful the trading scheme, over the long haul, abnormal returns are sustained only through abnormal exposure to risk.He goes on to try to justify how the feasco was allowed to happen, but what basically did happen was due to a record of good profit, LTCM was left to make bad investements without question by those who should have questioned their digging themselves deeper and deeper when things started to go bad.
What has happened since then? How many others have been taking unreasonable chances under the assumption they would get bailed out if they went under? How many are in the process of going under right now because of the gambles they have been taking on high tech stocks that haven't lived up to expectations? Where do these investers think the profit they expect is going to come from?
If they took Y2K into consideration they would not expect a profit to show for a while at least. Yet they have driven up stock prices on the assumption that the involvement of these companies in high tech makes them potentially profitable. Actually the reverse should be true. High technology made them vulnerable to Y2K problems which cost them dearly.
Is it just me, or are they looking at things kinda backwards?
There is no way that the market will follow the trends it did in the past, with the lack of real understanding of how technology is effecting the economy, instant investing, day trading, indivuals trading for themselves following their personal whims instead of going through stock brokers and firms who, in the past followed a basic standard they were trained in for reasons they were taught to follow, the impatience of many don't want to invest for the long term-wanting fast profits, the instantainious worldwide information superhighway, as well as the the ease in which scams can be pulled on the internet as well as any number of other reasons.
There is just so much that Alan Greenspan and Co. will be able to do to control the volitility under these new conditions.
It's a whole new ball game and I don't know if anyone can predict where the market will go from here on. Electric co-op stocks are starting to look like safe long term investments.
-- Cherri (email@example.com), April 18, 2000.
Uuuuh, Cherri... ahem, excuse me, but, I think you are on the wrong thread. :-)
-- Hawk (firstname.lastname@example.org), April 18, 2000.
Thanks, I noticed that after I posted. I guess that after writing half the night and being in the process of getting my youngest off to school I went back to and posted on the wrong thread without paying attention :o(.
-- Cherri (email@example.com), April 18, 2000.
Gad, this is amazing. I read postings from folks like Cherri or Ken Decker and I think, "OK, someone explain how these people ever got labelled as 'Pollies'..."
You tell 'em, Cherri. Listening to these shills, errrr, analysts continually boost stocks really puts my teeth on edge.
-- DeeEmBee (firstname.lastname@example.org), April 18, 2000.
Wednesday April 19 12:41 AM ET
IBM Revenue Drops 5 Percent in 1Q
By DAVID E. KALISH, AP Business Writer
NEW YORK (AP) - IBM's sales slumped 5 percent in the first quarter, dragged down by a broad decline in products ranging from desktop computers to mainframes to hard disk drives.
The company posted a 3 percent increase in first-quarter profit on Tuesday that beat Wall Street forecasts, earning $1.52 billion, or 83 cents a share, in the three months ended March 31. That was up from a profit of $1.47 billion, or 78 cents a share, in the year-ago period.
IBM pushed profits higher partly by slashing costs by 6 percent. And the per-share profit benefited from the company's repurchase of $2.1 billion in outstanding shares during the recent quarter, which boosted the value of remaining stock.
The profit beat the 78 cents forecast by analysts surveyed by First Call/Thomson Financial.
But revenues unexpectedly dropped $19.35 billion from $20.32 billion amid a discouraging 12 percent slide in sales of hardware products and weak demand for other IBM products and services. Many analysts had expected higher overall sales for the quarter.
``There's no question that the revenues were very disappointing throughout,'' said George Elling, an analyst at Lehman Brothers Inc.
Personal computer sales were hurt by IBM's move last year to stop selling its Aptiva consumer machines in retail stores, and by slow desktop sales to business customers. Demand weakened for powerful mainframes as companies continued to hold back spending in the wake of the Y2K computer problem. Analysts also were disappointed by soft sales of hard disk drives, which store information in computers.
Revenue for services, in which IBM helps set up and maintain computer systems for big corporate customers, was flat at $7.6 billion partly because business customers stopped spending about $1 billion a quarter on fixing Y2K computer bugs.
But analysts questioned why some other large rival services companies didn't experience the same weakness described by IBM.
Sales of IBM software were also flat, at $2.9 billion, amid weak demand for its Tivoli business management software.
Also hurting revenues were lower sales of memory chips.
IBM chief financial officer John Joyce said that despite its revenue weakness, IBM should start growing again this coming fall.
``For all practical purposes, Y2K is behind us,'' he told analysts in a conference call. ``We're well-positioned for growth in the second half.''
-- (M@rket.trends), April 19, 2000.
I would say that IBM is in terminal decline, I predict a slow and lingering death
they're not really much different than they were in the mainframe days except they wear blue T shirts instead of suits
a large and unresponsive bureaucracy not geared up for today's world
-- richard (email@example.com), April 19, 2000.
I would disagree with IBM's future, Richard. I've seen some very exciting software developments coming out of IBM recently that could give the competition a run for their money.
I WAS disappointed that they stopped selling their Aptiva's in retail stores. I have an Aptiva purchased 4 or 5 years ago. When the monitor blew out, the replacement was a COMPAQ...curses....a sleek, black system with a non-matching beige monitor with speakers hanging off the sides like big ears.
-- Anita (Anita_S3@hotmail.com), April 19, 2000.
I'm just going by their response to an ITT invitation to tender we did for providing internet services, it was well presented but seemed to be reminiscent of the old days, we chose them to do the work, but now the project is on the back-burner, will report back on progress if there is any
-- richard (firstname.lastname@example.org), April 19, 2000.