Circuits Assembly Online Magazine - IBM Outlook Good Sign for EMS

ARMONK, NY -- IBM's systems revenue rose 2% in the first quarter versus a year ago, providing some hope for the company's EMS suppliers.

Hardware revenue was down 7% year-over-year to $4.2 billion. Excluding printers and microelectronics, revenue was up 2% versus a year ago. Storage and System z (IBM's mainframe computing) segments were each up 10%.

Among IBM's key EMS suppliers, Celestica and Benchmark Electronics have the largest exposure to the computing giant's ups and downs.

According to Deutsche Bank, sales to IBM makes up 7 to 10% of revenue for Celestica and Benchmark, and about 2 to 4% of Flextronics' and Jabil's revenues.

Celestica and Flextronics are believed to build storage systems for IBM, Celestica through IBM's System p and i midrange servers, and Flextronics in high-end servers. Jabil also builds some midrange servers.

"Positive comments on IT spending bode well for the EMS industry," said DB analyst Sherri Scribner in a research note.