IBM’s fourth quarter figures – see Company Results – fully lived up to the worst fears of the analysts – indeed the $7.81 per share out-turn for the year bettered the forecast of only one observer – we were going for about $7.93. The initial reaction of the shares was modest, a $1.125 fall that had recovered within the hour to a fall of less than 50 cents, and the market continues to take IBM’s non-participation in the raging bull run in its stride. The company sees little prospect of anything better in the first quarter of 1987, and says that its cost reductions and new products will not feed through to the bottom line until the second half. One of the worst aspects of the figures is the fact that they would have been very substantially worse but for the weakening of the dollar: favourable currency movements added $4,365m to turnover and $645m to profits. The breakdown of the fourth quarter figures shows sales down 4.4% at $12,261m, services – including software – up 19.7% at $4,129m, and rentals, likely to drop out of the picture altogether next year, down 37% to $555m. The dreadful performance underlines the fact that IBM no longer has the cushion of its rental base to see it serenely through sluggish times; the fact that services revenue soared again points up the one area where IBM does have a captive market: its customers have little alternative but to pay ever higher rental charges on IBM’s system software, and on maintenance – although defections to third party maintainers could start to hurt IBM’s calculations quite soon. The company is already set fair for another rotten year in 1987, and Europe does not look likely to rescue it this time. The figures from IBM France were also published yesterday, and showed profits down 14% at FF2,472m on turnover down 3% at FF36,627m. Since exports rose 5.1% to FF18,109m, 49.4% of turnover, IBM France had a truly rotten year within its own territory. It manufactures the 3090s for Europe, but its performance in 1986 scarcely justifies that privilege.