Louis Gerstner Business Quotations

On a positive note, our services business continued to overtake the Y2K pause that pressured the first half of the year, ... Our PC business rebounded strongly, with particularly good demand for our server and ThinkPad products. In addition, our business in Asia continued to grow strongly.

On the positive side, our services revenue grew by nearly $1 billion and this business made a major contribution to the company's earnings. Our software revenues showed good growth and the software gross margin improved for the fifth consecutive quarter,

Business conditions remain difficult as we enter the new year, although we believe that our business will strengthen as we move through the year,

Our second-quarter results are right in line with our expectations and with the view we've been expressing since last October, ... Essentially, we've had three quarters of slow revenue growth, driven by a combination of the Y2K slowdown and a series of actions we've taken to improve our business portfolio. During that time, however, we have been able to produce satisfactory earnings growth.

Results from these areas more than offset revenue declines in some other segments, most notably our consumer PC business

We would like to have seen more revenue in the quarter, but we were held back by three items, ... First, demand for our microelectronics products -- from both outside customers and internal IBM customers -- far outstripped our ability to supply components. Second, the upcoming release of our new high-end server slowed demand for the System/390 family of servers. Finally, parts of our software business slowed unexpectedly in September.

These results show the ongoing strength of our broad business portfolio, ... We saw very good customer response to our new System/390 servers and continuing strength in services and hard disk drives.

Services is clearly the largest and fastest-growing portion of the information technology industry, and we continue to extend our leadership position each quarter, ... Our software business continues to gain momentum.