Big Blue?s profits defy the analysts

IBM admitted its European business was weak during its fourth quarter but it defied analysts? predictions and inc-reased its quarterly profit by 18 per cent.

Chairman Lou Gerstner said IBM showed growth ?despite a difficult year-on-year comparison, continued weakness in Europe and a greater-than-expected currency impact?.

Despite worries that the strong dollar would hamper its figures, IBM made a total of $2.02 billion in the quarter to 31 December.

Analysts at Morgan Stanley had warned that the dollar?s strength in the three-month period could cut IBM?s revenue by up to 25 per cent per share, but it only cut absolute figures by three per cent.

But analysts praised IBM for its good figures ? they expected IBM to improve slightly on last year?s Q4 figure of $1.7 billion and to report profit of about $1.88 billion.

IBM said all territories increased their revenues except EMEA, whose three per cent growth in real terms was cut to zero by currency fluctuations.

Industry analyst Salomon Brothers predicted IBM will spend $700 million on organisational changes in Europe and that RS/6000 sales will be very strong in the coming months. IBM?s services revenue grew 22.3 per cent to $6.01 billion, while software and hardware revenues inc-reased by 3.9 per cent and 1.7 per cent respectively.

But low memory chip prices stopped IBM reporting good results all round. For the first time in recent years, IBM decided to release its results after Nasdaq closed, to avoid the wild fluctuations in stock that have accompanied its announcements in the past.

For its full year, IBM made $6.02 billion profit, up from $5.86 billion in the previous year, on turnover of $76.95 billion, up from $71.94 in 1995.