January 24, 1995 in Nation/World

Ibm Earns $1.2 Billion In Year’s Final Quarter Big Blue Produces First Profitable Year Since 1990 With Annual Income Of $2.88 Billion

Associated Press
 

IBM earned $1.2 billion in the fourth quarter, boosted by stronger than expected demand for large computers, to end its first profitable year since 1990.

The performance reported Monday exceeded Wall Street forecasts as gross margin and revenue improved and sales and research expenses were sharply below year-ago levels. The job cuts that have gone on for several years are mostly over.

But, in a statement with the earnings report, Chief Executive Louis Gerstner Jr. said, “We are not satisfied with our revenue growth. The pace of change at IBM must continue.”

IBM’s profit amounted to $2.06 per share for the quarter that ended Dec. 31. It earned $362 million, or 62 cents per share, in the same period of 1993.

Revenue was $19.9 billion, up from $19.4 billion a year ago. In January 1994, IBM sold a subsidiary that developed computers and software for the government. With the results of that unit excluded from the 1993 fourth quarter, IBM’s revenue was up 6.6 percent from $18.7 billion.

Analysts had forecast a profit of around $1.75 per share for IBM. The company’s stock closed down $1.37 cents at $74.00 on the New York Stock Exchange.

International Business Machines Corp., the world’s largest maker of computers, software and related services, has been fighting for several years to align itself with changes in the technology market.

It has cut tens of thousands of jobs and shed unneeded office space and factory assets in the past few years. The job-cutting peaked with about 45,000 lost in 1993. Last year, IBM cut about 35,000 jobs, 11,000 through the sale of the government systems unit. It now employs about 220,000.

The company’s fourth-quarter expenses were down 11 percent, or $729 million, against the yearago period. Annual expenses dropped 15 percent, or $3.5 billion.

For both the quarter and year, sales expenses dropped as a percentage of total revenue to 25 percent from 28 percent. Research expenses as a percentage of revenue fell to 5.6 percent from 7.5 percent in the quarter and to 6.8 percent from 8.9 percent in the year.

While demand for mainframe computers continued to outstrip supply, IBM’s revenue from large systems did not keep pace because of price reductions. The company showed strong revenue growth from sales of its AS-400 mid-range computer line.

IBM’s personal computer unit, which grew sharply in 1993, lost revenue in both the quarter and full year.

IBM’s gross margin was 40.6 percent in the quarter, up from 38.2 percent a year ago. For the year, gross margin was 39.5 percent, up from 38.5 percent in 1993.

The company earned $2.88 billion, or $4.92 per share, in 1994. It lost $8.1 billion in 1993, or $14.02 per share, after taking a nearly $8 billion restructuring charge in the second quarter.

Revenue was $64.1 billion, up 2 percent from $62.7 billion in 1993. With the government systems unit excluded from 1993 results, IBM’s revenue grew 6 percent from $60.4 billion.

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