View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Technology
January 18, 1989


By CBR Staff Writer

IBM failed to live up to analysts’ best expectations with its fourth quarter figures, just failing to make the $4 a share – the figure came in at $3.97 – against forecasts that had gone as high as $4.15. More seriously, without a $315m gain from change to the new accounting standard in the first quarter, net for the whole of 1988 would have been up just 4.4%, and 6.3% at the per share level because IBM has been buying in its shares. And that on turnover up 8%, so despite all the cost reductions – and extraordinary gains came close to cancelling out charges over the year – profits growth is still not keeping pace with turnover growth. Reflecting this, the shares reacted to the figures by shedding $1.25 to $122.50 immediately after the numbers appeared – although worse than expected US trade figures didn’t help. About 6,500 employees left the company under the consolidations, which should improve the cost structure some this year. Breaking down the figures, sales in the fourth quarter rose 10.3% to $14,264m, software business – that new software on the AS/400 is expensive – rose 15.5% to $2,283m, and support services rose just 2.1% to $2,496m – IBM is facing strong third party competition and is having to pass its own savings on increased reliability on to customers. That diminishing asset, the rental base, continues inexorably to diminish, and is likely to drop out as a separate item this year or next – in the fourth quarter it slipped another 6.5% to $604m. As for the year, sales rose 9.7% to $39,959m, software appears to have risen 12.8% to $7,926m – the figure was omitted from the AP Dow Jones report from which these figures are drawn – support services fell 0.1% to $9,285m, and rentals fell 7% to $2,699m. Non-US business in 1988 rose 15.5% to $34,400m and now accounts for an historically very high 57.6% of the total, leaving IBM very vulnerable to an appreciation of the dollar. And profitability in the foreign business also improved much faster than in the US – non-US net profit rose 23.3% to $4,100m before applying the SFAS 96 accounting change. Chairman John Akers is becoming a pastmaster at the bland non-commital comment to accompany the figures and this time declared that we have increased our efficiency significantly. The company is continuing to show improvement in our product line, our relationships with our customers and our financial performance. We are managing for the long term, and with the steps we are taking, we remain confident about the future of our business. Analysts who had been bullish before the announcement were nevertheless not too disappointed with the figures.

Content from our partners
Scan and deliver
GenAI cybersecurity: "A super-human analyst, with a brain the size of a planet."
Cloud, AI, and cyber security – highlights from DTX Manchester

Websites in our network
Select and enter your corporate email address Tech Monitor's research, insight and analysis examines the frontiers of digital transformation to help tech leaders navigate the future. Our Changelog newsletter delivers our best work to your inbox every week.
  • CIO
  • CTO
  • CISO
  • CSO
  • CFO
  • CDO
  • CEO
  • Architect Founder
  • MD
  • Director
  • Manager
  • Other
Visit our privacy policy for more information about our services, how Progressive Media Investments may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.