IBM, Intel beat expectations

Intel saw strong demand in the first quarter

The world's largest semi conductor maker Intel saw its profits jump nearly 40% in the first quarter of this year.

Its strong earnings reinforces analyst perception of the company as one of the safest bets in the technology sector.

Earnings were also strong at computer maker IBM but it saw its revenues hit by poor sales of desktop computers and mainframes.

The company still expects this year to be a good one and blames the poor sales on the drop in computer spending in the wake of the millennium changeover.

IBM slowdown

"This was a transitional quarter, as we expected, with Y2K lockdowns continuing until late in the quarter," chairman and chief executive Louis Gerstner said in a statement.

IBM revenues fell 5% to $19.3bn, disappointing analysts who had expected customers to have recovered by now from the preparation work they did for the millennium bug.

IBM's Gerstner says 2000 will be a good year

Personal computer sales were also hurt by IBM's decision to stop selling its Aptiva machines in retail stores.

The company's share price is likely to be hit by the news when the market reopens on Wednesday.

Shares in IBM, which closed at $115, slipped to $112 in after hours trading in New York.

But the company's earnings did beat market expectations.

Its profit rose 3% to $1.52bn, compared with $1.47bn a year ago. Earnings per share were 83 cents, compared with Wall Street expectations of 78 cents.

Intel boom

Intel now looks set to build on its popularity with investors.

Many analysts are already positive about the semi conductor sector, seeing it as the safest bet in the technology market.

Earlier on Tuesday, the stock had rallied when Morgan Stanley said analyst Mark Edelston upgraded his rating on Intel to strong buy from outperform.

Intel's profit jumped 37% to $2.7bn, from $2bn in the same period last year.

Its earnings were 71 cents per share, compared with expectations of 69 cents per share.

Stronger than expected computer sales also boosted its revenues to $8bn from $7.1bn last year, the company said.

Traditionally, the post Christmas period sees sluggish sales.

"Seasonally this is usually a weak quarter for them, and it came in stronger than expectations'' a Salomon Smith Barney analyst said.