OK, let's admit it: The news hasn't exactly been good for companies involved in the mainframe business.
Electronic Data Systems, Computer Sciences Corp., Unisys, BMC Software and Computer Associates International have all warned investors that their companies' performances for this quarter are way off projections.
So where does this leave investors in IBM - the bellwether of the industry - who have already seen a 5% decline in revenue for the first quarter?
Wall Street analysts interpret IBM and its future performance in contrasting ways. Don Young, who watches IBM for Weehawken, N.J.-based PaineWebber, urges caution on the company, "given near-term weakness in global services."
He says he anticipates global service revenue growth of 5% for the second quarter and "would not be surprised if the company reports even weaker numbers - as little as no growth."
Services have been IBM's growth engine, posting revenue gains of 15% in last year's second quarter. Estimates for the current quarter range from 8% to 14%.
"The hardware segment is fraught with extremely difficult year-ago [comparisons], specifically, hardware revenue growth of 22% in the second quarter of 1999," Young says. The revenue shortfall in this year's first quarter was due to a decrease in hardware sales.
Other analysts have come to slightly different conclusions.
Toni Sacconaghi, an analyst at New York-based Sanford C. Bernstein & Co., acknowledges that comparing this year's results with last year's is difficult because of Y2k-related demand distortions and falloffs in revenue and profits.
But Sacconaghi says he believes that IBM will deliver on the "Big 3."
"I think they will post double-digit revenue growth, above-consensus earnings per share and will register strong MIPS growth," says Sacconaghi.
Stephen R. Weber, an analyst at SG Cowen Securities, says he sees a recovery in IBM's OEM business. And while he expects lower revenue in the second quarter, e-commerce-led services and software sales should facilitate stronger growth after the second quarter.