Despite continued weakness in its European business that so many other hi-tech companies are also experiencing, and a greater- than-expected negative currency impact of 3%, IBM Corp was still able to record a fourth quarter net income of $2bn, up 17% on the $1.7bn it did last time, on revenue of $23.1bn, up 5.6% on $21.9bn. Big Blue managed to squeeze an additional five cents out of the quarter, reporting earnings per share of $3.93, where analysts had been looking for $3.88, although many most had been quietly hoping that the company would break $4.00. Revenue for the year was up 6% at $75.9bn compared with $71.9bn in 1995; net income of $5.4bn was up 28% on last year’s $4.2bn. Both figures include charges for acquisitions.
PC Co and services praised; new kids Lotus and Tivoli too
Chairman and CEO Louis Gerstner highlighted the company’s improved fourth quarter performance in services and software, especially the Lotus and Tivoli units, and the turnaround in the PC Company. In the geographies, revenue from North American sales was up 11% at $9.6bn, Asia-Pacific up 6% at $4.3bn, Latin America up 4% at $1.1bn, while Europe, Middle East and Africa was flat at $8.1bn. Hardware sales shaded up 2% at $11.7bn over the fourth quarter of 1995 due to increased sales of PCs, AS/400s, storage and networking products while System/390 and IBM Microelectronics declined and RS/6000 was ominously flat. Service revenue increased by 22% to $5bn, software by 4% to $3.7bn. IBM claims 1.5m Lotus notes seats were installed during the quarter – 4.5 million in the year – for a total installed base of 9 million seats. It says its Tivoli unit sold more systems management products in the quarter than its entire 1995 business was worth; Tivoli did $50m revenue in 1995 which predates IBM’s acquisition. Maintenance revenue was down 6% at $1.7bn while revenue from rentals and financing grew 9% to $1bn. Gross margins were down 3% at 40.3% compared with 41.7% in the fourth quarter of 1995. IBM said currency weakness cost it 3% of revenue in the quarter compared with a 2% gain in the same period last year. For the full year, hardware sales were up 2% at $36.3bn, services up 25% at $15.9bn – services now account for 21% of revenue – software revenue up 3% to $13bn, maintenance down 6% to $7bn and rentals and financing up 5% at $3.7bn. IBM finished the year with $8bn in case after $6bn capital expenditures, $1bn acquisitions and $6bn share buybacks. IBM shares put on $2.375 on the day to reach $169.375 ahead of its fourth quarter earnings announcement but fell back to $168.00 before the bell. Analysts expected the stock to fall slightly in after hours trading citing a lack of reason to drive shares up on results that were just a shade ahead of expectations.
