1 result causes IBM share slump slump

The manufacturer's announcement caused the price of shares on Wall Street to plummet. Wale Azeez reports.

IBM has warned that its first quarter results to March will come inStreet to plummet. Wale Azeez reports. below expectations, after it revealed full year figures for 1997.

The warning sparked off a share price dive on the Dow Jones, which fell one per cent, down 78.7 points to 7,794.4 on 20 January. IBM's own shares tail-spinned 8.3 per cent down to a new value of $100.1.

Fourth quarter net profit in the period to 31 December 1997 was also disappointing at $2.09 billion, stagnant from $2.02 billion last time.

Sales reached $23.7 billion, compared with $23.1 billion in 1996. Gross profit margins for the fourth quarter were also flat at 40 per cent.

In the 12-month-period, net profit was $6.09 billion, up 3.9 per cent from $5.86 billion in 1996 on sales of $78.5 billion, up 3.4 per cent from $76 billion last time.

In a statement by chairman Louis Gerstner, IBM blamed 'a number of very difficult factors' for the flat profits in 1997, among them 'weakness in some Asian markets'. Asia-Pacific revenue was flat at $4.4 billion. But EMEA sales faired no better, declining at four per cent to $7.7 billion.

Hardware revenue across the organisation fell by one per cent year-on-year to $11.5 billion. This was attributed to a slump in sales of System/390 and AS/400 systems as well as PCs. IBM said its PC division had done well within the corporate market, but this was countered by weak sales of its Aptiva consumer desktops. Maintenance revenue also fell by nine per cent to $1.6 billion in Q4, and rentals and financing revenues dropped by four per cent to $1 billion.

However, total software revenue rose by one per cent to $3.8 million, helped by the shipment of four million copies of Lotus Notes.