IBM Meets Expectations, Closes Out Tough Year

By eweek  |  Posted 2002-01-17 Print this article Print

Despite fourth-quarter sales that were nearly $1 billion below expectations, IBM met Wall Street profit projections to close out what executives admitted was a "tough year."

Despite fourth-quarter sales that were nearly $1 billion below expectations, IBM met Wall Street profit projections to close out what executives admitted was a "tough year." In a potentially more ominous sign for the industry, IBM offered no projections for the coming year, citing continued economic uncertainty.
For the quarter, net income for the giant Armonk, N.Y.-based company fell 10 percent from a year ago to about $2.3 billion, or $1.33 a diluted share. The showing topped Wall Street estimates by a penny, according to Thomson Financial/First Call.
However, the companys total sales slipped further than expected, dropping from about $25.6 billion to $22.8 billion, about $900 million below analysts projections. IBM Chief Financial Officer John Joyce on Thursday blamed the shortfall in revenue on the difficult economic climate worldwide, and more specifically, on "two heavily distressed segments, PCs and OEM technology," which includes computer components, such as hard drives. But thanks to the "breadth of our portfolio," IBM was able to meet earnings estimates, Joyce told market analysts in a conference call. For the quarter, IBM said it was pleased to see strong sales of its larger mainframes, such as its zSeries and the recently introduced "Regatta" pSeries, but profits from those products were not enough to offset declining sales of its computer components and PCs. Overall, IBMs hardware sales fell 24 percent to $8.71 billion from $11.46 billion from the same period a year earlier. To reduce the drag its PC division has had on earnings in recent year, IBM this month announced a $5 billion deal to turn over the manufacturing of its desktop computers in North America and Europe to Sanmina-SCI Inc., of San Jose, Calif. Big Blues highly touted Global Services Division once again provided relative stability in an otherwise down year, posting sales of slightly more than $9 billion, only a 1.4 percent dip from last year. Looking ahead, Joyce predicted IBMs services numbers will improve next quarter. "We were pleased with our fourth-quarter signings, over $15 billion, which was up 54 percent from the third quarter and 22 percent from last years fourth quarter," he said, adding that revenue generated by those contracts will start showing up in the first quarter of this year. IBMs software division turned in the companys best performance, with revenues climbing 6 percent, from $3.57 billion a year ago to $3.78 billion last quarter. For the year, IBMs net income totaled $7.7 billion, down from $8.1 billion last year. Annual revenue totaled $85.9 billion, a decline of 3 percent from the previous year. In an indication of continued uncertainty about when a possible industry recovery might begin, Joyce begged off offering specific guidance for the coming quarters. "2002 is going to be another demanding year, and a tough one to forecast," Joyce said. "Strategists and security analysts are quite undecided about what to expect of earnings growth for the market as a whole, and for the technology sector in particular." As a result, he would only offer the projection that the company will further reduce operating costs and gain market share in software, services, storage and servers.

Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel