IBM Corp came in with fourth quarter figures pretty much on the button with earnings per share of $0.62 where the mean of 19 analysts’ forecasts came to 64 cents: the fact that the figures were no better than expected caused Wall Street to mark the shares down a couple of bucks at $56.625%. IBM’s overall hardware sales revenue was $10,400m in the fourth quarter, a decline of 5.4% against a period that hardly provided a tough comparison. Services revenue was up 31.9% at $3,200m, but it appears that this business – taking in other people’s washing is not making any money. And the decline in AS/400 sales led to a decline of 3.8% on software revenues at $3,069m. Maintenance, rentals and financing revenue also decreased. Chairman Louis Gerstner notes that the company was profitable in the fourth quarter despite tough business environments in Europe and Japan, and the results of the work we are doing on our strategic priorities will become clearer to our customers in 1994. On a geographic basis, IBM’s US revenues grew by 9% in the fourth quarter compared with the same period of 1992, continuing the quarterly improvement trend.
Unix machines not growing
Revenue from Europe and Asia after currency adjustments, declined in the fourth quarter by 1% and 4% respectively. Personal computer revenues rose strongly in the quarter – but is IBM making any money here? – and RS/6000 revenue increased, but the Unix machines are clearly not growing anything like fast enough to meet IBM’s objective of overtaking Hewlett-Packard Co and Sun Microsystems Inc and becoming the market leader. AS/400 revenue fell in the quarter primarily as a result of sluggish European demand. Mainframe and high-end disk drive revenue also declined year-over-year. Despite all those devastating cuts, IBM’s overall gross margin was still down about one point in the fourth quarter compared with the 1992 period. Margins jumped around all over the place, with gross margins on hardware at 36.9%, up from 33.9%, on software at 57.2%, down from 62.1%, on services a dreadful 11.5%, down from 14.9% – which implies a big loss after selling, general and administrative expenses. Maintenance margins also fell, to 49.8% from 52.7%, but rentals margins were up just over a point at 57.3%. Hardware sales margins improved in the fourth quarter, but software, maintenance and services margins declined. Total expenses, including net interest expenses but excluding restructuring charges, declined 9% in the fourth quarter compared with the same period of 1992. For full-year 1993, before taxes and restructuring charges, IBM earned a derisory $148m from operations, and after-tax results were essentially break-even. After preferred stock dividends, the company had a loss, before restructuring charges, of $.07 per common share in 1993. Including restructuring charges of $8,900m, IBM reported a 1993 net, after-tax loss of $8,000m, up from a net loss of $6,900m in 1992. Worldwide turnover for the year slipped 2.8% to $62,700m; revenue from non-US operations, included in the 1993 results, slumped 7.2% at $37,000m. The workforce fell 45,000 to 256,000 in the year, and another 10,000 will go when the Federal Systems Co is sold this quarter. At year-end IBM had some $7,100m in cash and marketable securities, up by $1,500m. The dividend is 25 cents.
