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Computermakers have rough day // IBM

IBM posted better-than-expected first-quarter operating earnings and raised its dividend for the first time in three years Wednesday. But its stock plunged nearly 9 percent after the company's chief financial officer worried analysts and investors about its performance in the months ahead.

The stock plunge also sent the Dow Jones industrial average into a tailspin; it ended at 5,549.93, down 70.09 points. IBM shares were down $10.25, to $105.25, on the New York Stock Exchange.

Several analysts who follow IBM were surprised by the heavy selling. "This is not a company that is going to pieces or anything like that," said Gary Helmig, an analyst at Soundview Financial Group in Stamford, Conn.

Indeed, the initial news that IBM had surpassed analysts' estimates for the quarter sent the stock soaring in early trading Wednesday.

The subsequent sharp turnaround after IBM's chief financial officer G. Richard Thoman addressed analysts underscored the frayed nerves many investors have about technology stocks in general and IBM in particular.

After nearly imploding in 1993, the company rode a bull market in technology stocks to a five-year high Feb. 27, closing at $128.75. Now many investors worry whether the company, after successfully cutting expenses, can match the rest of the computer industry's historically strong revenue increases.

Most of Wednesday's worries focused on the company's declining profit margins and the the impact of a weaker Japanese yen on its earnings in the current quarter.

"There are some concerns about growth, and people buy technology stocks for growth," Helmig of Soundview said.

IBM said it earned $774-million, or $1.41 a share, in the quarter ended March 31, including $671-million in charges related to the acquisition of two software companies and cost reductions, mostly overseas. That compared with earnings of $1.3-billion, or $2.12 a share, a year ago.

Excluding the charges, however, the company earned $1.4-billion, or $2.48 a share, surpassing the average forecast of analysts, which was about $2.41 a share. Total revenue was $16.6-billion, an increase of 5.2 percent.

"I thought it was a pretty good quarter," Thoman said in an interview Wednesday. But that was certainly not the message that emerged from his 90-minute session with analysts.

Before Wednesday's meeting, many analysts had expressed concern about how changing foreign currency values would affect IBM's earnings in the coming months. The yen has weakened considerably against the dollar this year, whereas last year its strength had helped bolster IBM's earnings in Japan.

Rather than let the analysts speculate, Thoman stated that the company was likely to bear the brunt of the currency shift during the current quarter, sacrificing about 25 cents a share in earnings compared with the 36-cents-a-share lift a year ago.

Moments later, IBM shares began to fall sharply. They continued to decline as Thoman described the difficulties the company might have in maintaining the profit margins on its mainframe computers and other hardware during the months to come.

Meanwhile, IBM said it would increase its per-share dividend 10 cents, to 35 cents a quarter, beginning in June for shareholders on record as of May 10.

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