Although the immediate response to IBM’s fourth quarter figures was a modest slip in the share price of $2 and change (CI No 849), the considered view of the superficially encouraging figures was decidedly more bearish, and the shares closed a full six dollars off at $111.75 after we went to press. As we pointed out yesterday, the more the figures are examined, the worse they look, and few other elements have come to light. Had it not been for a 56 cents a share benefit from a lower tax rate, a gain of more than 20 cents a share from sale of IBM’s Intel shares, and as much as a dollar a share from the gain from the decline in the US currency against those in its European markets and most importantly Japan, the company would have reported its third straight down year in a row. And as it was, the 1987 net figure was below those of 1983, 1984 and 1985. IBM says that the decline in the dollar was good for an estimated $3,470m on turnover – without it, turnover would have fallen in 1987 – and $615m on profits. Mainframe sales rose a bit – but there are strong suspicions that some of those were borrowed from the current quarter. But sales of disk drives, where third party competition is still not a serious challenge, declined. And IBM acknowledges that it failed to make even its modest target of 5,000 9370s shipped.
ONLY DOLLAR DECLINE AND SPECIAL FACTORS AVERTED ANOTHER “DOWN” YEAR FOR IBM
