The furious pace of computer business in the fourth quarter of 1994 caught Wall Street analysts on the hop, and all the majors seem to be reporting profit figures that top the best estimates of the analysts, and IBM Corp was no exception, coming in with earnings per share of $2.03 where analysts had been going for a range of $1.93 down to $1.40, with a mean of guesstimate of $1.73. But the market is a fickle mistress, the fact that the figures were going to be the best for the company since 1990 was already in the share price, and the – already known – dire state of IBM’s personal computer business was what grabbed traders’ attention, with the result that the first reaction of the share price was to shed almost a dollar, falling 87.5 cents to $74. 50. Turnover was up 6.6% at $19,900m after adjusting the year-ago figure for sale of the Federal Systems Co, but growth on a constant currency basis was up only 3%. The word on personal computers was that fourth quarter revenues declined, with particular weakness in the US, where it was sold out of its new Aptiva machines in December. Demand for mainframes and storage products far outstripped supply, the company says, but a substantial part of that backlog may well end up with competitors. Services business was up 30% in the quarter. For the year, the company says it cut expenses by $3,500m and has completed nearly 80% of its $8,000m programme to cut costs. We enter 1995 with the bulk of our right-sizing behind us, said chairman Louis Gerstner. Efforts are well under way worldwide to re-engineer virtually every part of the company. These actions will result in additional reductions in our cost and expense structure this year and in the future. I am proud of what our employees have accomplished and by their determination to move forward on these difficult tasks. But he never delivers a eulogy without a word of caution, and added Despite the progress we have made, however, we are not satisfied with our revenue growth: the pace of change at IBM must continue as we increasingly focus on growth and on the implementation of our long-term strategies. Geographically, Europe was up 8% in the quarter at $7,600m; Asia-Pacific grew 11% to $3,400m and the US grew 5% to $7,000m. Latin America put a damper on things, falling 6% to $1,100m.

Power Parallel

Total hardware sales rose 3% to $10,600m compared with the same period of 1993, while total software revenue grew 7% to $3,300m. Services revenue grew 31% to $3,300m, and maintenance was up 2% at $1,800m. Rentals and financing slumped 13% to $862m. Overall mainframe revenue fell as a result of year-on-year price reductions. Revenue from the Power Parallel unit was strong. A booming AS/400 fourth quarter was expected, but IBM says onlt that AS/400 and RS/6000 revenue continued to grow significantly as a result of strong customer acceptance of new models. Demand continued to exceed supply for some personal computer models, including ThinkPads, and IBM was also backlogged on the new line of high-end disk products, yet still managed to turn in a d ecline overall storage revenue. The OEM business nearly doubled, but no number was put on it. The gross margin, which has held steady for the last two years, was 40.6% in the fourth quarter. Expenses fell 11% or $729m, in the quarter and 15% or $3,500m in the year. Cash at year-end stood at $10,600m, total debt was $22,100m, down by $5,200m and made up of $2,900m to support operations and $19,200m to finance credit operations; that was down $1,900m.