IBM Posts Solid Q4 Earnings Performance

Apparently, there was a good reason that IBM Corp. was one of the few major computer companies that did not issue a fourth quarter profit warning.

IBM escaped the financial woes that have plagued the IT industry of late, announcing fourth quarter net income of $2.7 billion on Tuesday, a 28 percent increase from the year-earlier period. In doing so, Big Blue earned $1.48 per share, surpassing analyst expectations by two cents.

Overall, IBM’s fourth quarter revenues rose 6 percent to $25.6 billion. For the full fiscal year, IBM’s earnings per share grew 19 percent to $4.44 per share, while net income increased 16 percent to $8.1 billion.

“We expected our revenue growth to continue in the fourth quarter and that’s what happened,” John R. Joyce, IBM senior vice president and chief financial officer, said in the earnings teleconference. “It’s clear from our fourth quarter performance that the market is continuing to shift in our favor.”

Hardware revenue was a bright spot for IBM. After declining during the first two quarters of 2000, hardware revenue was up for the second quarter in a row, increasing 16 percent from the year-earlier period.

The IBM eServer family saw its revenue increase 35 percent. IBM’s NT servers, the xSeries, saw its revenue increase 29 percent. “We saw improved performance across the board in our server division, especially on Web servers and the new z900 server,” said Joyce. According to IBM, there was also a strong revenue increase in its pSeries Unix servers.

The Global Services division continued to be a strong market for IBM, growing five percent in the fourth quarter. There was a particularly strong demand for e-business services, which saw its revenues increase 70 percent from the year-earlier period.

On the down side, IBM’s software revenue was $3.6 billion, a one percent decrease from the year-earlier period.

Looking ahead, IBM admitted there was concern about the state of the U.S. market, but preached confidence nonetheless.

As we look to 2001 there is uncertainty about the economic climate in the U.S.," said Louis V. Gerstner, Jr., IBM chairman and CEO. “However, IBM's broad portfolio should position us well relative to our competitors.” – Jim Martin

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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