Results - Y2K fears pull down IBM profit

Strong expense controls have helped IBM to beat analysts' lower expectations for the fourth quarter, but profit still plunged 11 per cent after millennium bug fears reduced corporate spending on IBM products.

Strong expense controls have helped IBM to beat analysts' lower expectations for the fourth quarter, but profit still plunged 11 per cent after millennium bug fears reduced corporate spending on IBM products.

IBM, which appears to be the manufacturer hardest hit by the millennium slowdown, said it had earned profit of $2.1bn (£1.4bn) on turnover of $24.2bn for the quarter ended 31 December, down from $2.3bn on turnover of $25.1bn for the fourth quarter in 1998.

Profit for the year rose 22 per cent from $6.3bn to $7.7bn, while turnover increased seven per cent from $81.7bn to $87.5bn, powered by strong sales in the first half of the year.

Louis Gerstner, chief executive of IBM, said: "As anticipated, the Y2K problem hit us hard in the fourth-quarter." But overall, 1999 had been a good year, with record profit as a result of a jump in e-business service revenue and growth in services, software and OEM technology.

Total expenses in the fourth quarter fell by nine per cent.

Full-year turnover was up by five per cent to $38.8bn in the Americas, two per cent to $25.7bn in EMEA and 19 per cent to $15.2bn in the Asia Pacific region. Hardware turnover for the full year increased five per cent to $37bn, while Global Services turnover rose 11 per cent to $32.2bn. Software turnover increased seven per cent to $12.7bn.