IBM Corp turned in fourth quarter operating profits right at the bottom end of expectations, at $2.26 a share where one over-enthusiastic analyst had been going for $2.82 a share (CI No 1,839). There was confusion all morning on Wall Street because the company said the higher-than-expected restructuring charge was $3,400m because more people than forecast left the company – without spelling out that it was a pre-tax figure; people checking the sums found they didn’t add up. It also emerged late in the day that IBM had taken further write-downs of $200m to $250m for non-equipment write-downs, without which analysts would have been close to the mark. Turnover for the quarter dipped 4.2% to $22,082m. Breaking down the figures, fourth quarter sales were down 11.4% at $13.718m; software business was up 8.5% at $3,368m; maintenance totalled $1,913m, down 1.2%; but services rose 35% to $2,049m as IBM got to grips with systems integration. Rentals and financings were up 1.7% at $1,034m. Turnover for the year fell 6.1% at $64,792m made up of sales that slumped 15.6% at $37,093m; software that rose 5.8% at $10,524m; maintenance up 3% at $7,414m; services income up 35% at $5,582m and rentals and financing up 10.4% at $4,179m. The gruesome loss for the year after all charges was $2,827m. The slump in sales in the fourth quarter was a particular shock as analysts had seen only a 7% to 9% decline. Even John Akers couldn’t be too chirpy about the figures, saying 1991 was a disappointing year. We were adversely affected by protracted worldwide economic weakness, competitive pressures, and transitions within our product lines. Turnover from non-US operations was down 3.6% at $40,400m and net profits outside the US slumped 61% at $1,800m. The company reduced its workforce by 29,000 during the year against an expected 20,000 to 25,000; that will continue this year. As for the new year, IBM told analysts that the company was generally satisfied with Street forecasts for revenues and earnings this year.

Continue to struggle

You’re going to see the economy continue to struggle for a bit, a spokesman said. We believe that it will turn this year and the second half from an economic point of view will be much more robust from the first half. Analysts have been expecting the company to earn between 90 cents and $1.50 a share for the first quarter, with a mean estimate around $1.10. For the full year, estimates range from about $6 to $10 a share, with the mean at about $7.60. IBM repeated that it expects revenue growth this year in the mid-single digits, stabilising – if not improving – gross margins, decreased operating expenses and capital spending. It also pointed out that the decline in year-over-year hardware sales in the fourth quarter was less than in any of the previous three quarters and that mainframe revenues matched year-ago results (when it didn’t have any new machines shipping) and said it feels pretty good about the order backlog on Summits going into the first quarter. IBM also said disk drive shipments recovered in the fourth quarter from weakness earlier in the year, reflecting new shipments. Personal Computers did reasonably well. There was some drag on fourth-quarter revenues from displays, some telecommunications equipment and other storage products, IBM said.