IBM surprised Wall Street analysts yesterday by reporting an usually strong fourth quarter.
The hefty gain for the largest computer-maker was seen as evidence that the industry is set for a significant shakeout that will add pressure to weaker competitors.
International Business Machines Corp. said its income on an operating basis was up 16.1 percent in the quarter, aided by strong sales of new products.
Net income was more than four times greater than a year ago, but that increase was magnified by a large charge to earnings taken in the fourth quarter of 1989. Revenues increased 12.7 percent.
The report, capping a year of financial improvement for IBM, came in the face of growing concerns about the international economy and continuing doubts about IBM's success in controlling expenses.
"This is an upside surprise," said Ulric Weil, a computer industry analyst at Weil & Associates in Washington. "This is a very clean report. There are no gimmicks."
Driven by the unexpectedly strong fourth-quarter figures and by positive stock market reaction to the initial fighting in the Persian Gulf, IBM's stock jumped $6.625 a share yesterday, closing at $115.75 on the New York Stock Exchange.
Volume was 4.3 million shares, putting IBM at sixth place on the Big Board's most-active list.
Wall Street analysts had generally cut their earnings estimates for IBM in recent weeks, concerned that the U.S. economy was rapidly deteriorating and that European growth, which has buoyed U.S. computer-makers in recent years, has stalled.
Most analysts had expected IBM's fourth-quarter earnings to be less than $4 a share, but the number came in significantly above that.
Net earnings for the fourth quarter rose to $2.46 billion, or $4.30 a share, up from $591 million, or $1.04 a share for the corresponding quarter in 1989.
The results in the 1989 quarter were depressed by the effect of a special $2.4 billion charge taken to cover the cost of eliminating a number of jobs, shutting some operations and other changes.
IBM's fourth-quarter revenues were $23.06 billion, up from $20.46 billion in 1989.
For the year ended Dec. 31, net earnings increased to $6 billion, or $10.51 a share, compared with $3.76 billion, or $6.47 a share, in 1989.
Revenue for the year was $69 billion, up 10 percent from 1989's revenue of $62.7 billion.
Part of the quarter's success was attributed to IBM's product cycle.