IBM closes out '91 with a 4th-quarter loss of $1.38 billion Company reports first yearly deficit

January 18, 1992|By John Markoff | John Markoff,New York Times News Service

NEW YORK -- Closing the record books on its most difficult year in decades, IBM said yesterday that it lost $1.38 billion in the fourth quarter, resulting in its first yearly deficit ever.

In addition, revenues were off 6.1 percent for the year, the first time in 45 years that growth has faltered at the world's largest computer-maker.

International Business Machines Corp. blamed a declining world economy, increased competition and the difficulties associated with introducing new product lines.

But a number of industry executives say the decline represents a more fundamental shift away from the centralized style of computing that since the 1950s has been the basis of IBM's business. Some analysts say the company reached a high-water mark in 1990 and will never again return to the revenue and profit levels of the 1980s.

For the quarter that ended Dec. 31, usually the company's strongest, IBM said revenue declined 4.2 percent, to $22.08 billion, from $23.06 billion a year earlier. The loss in the period included a $3.4 billion charge as part of a sweeping decentralization and planned job cutback.

By contrast, for the 1990 period IBM earned $2.46 billion, or $4.30 a share.

L It put the cost of the restructuring at about $4.68 a share.

For the year, IBM lost $2.83 billion on sales of $64.79 billion, compared with a 1990 profit of $6.02 billion on a record $69.02 billion in revenues. The results for 1991 included a one-time charge of $2.26 billion to cover an accounting change for retirement benefits.

After seesawing all day, IBM shares ended the day on the New York Stock Exchange with a gain of 87 1/2 cents at $96.375 a share.

"I think it's a terrible spending environment," said Stephen Cohen, an analyst at Soundview Financial Group. "Beyond that, I think that IBM is losing share in a lot of product areas, some of which they acknowledge and some of which they are not acknowledging."

Based on a trend variously referred to as "downsizing" or "network computing," during recent years corporate computer buyers have begun moving away from the multimillion dollar mainframe systems, which account for the bulk of IBM's earnings. Instead, they have begun buying smaller microprocessor-based systems and linking them to personal computers and work stations.

A number of Wall Street analysts said that despite the gloomy end-of-the-year report, IBM's efforts to control costs and restart growth would show results in 1992.

"The momentum is beginning to move in the right direction," said Steven Milunovich, an industry analyst with Salomon Brothers. "The problem is we don't know how much better it will be this year."

Last month, the company told Wall Street that its special charge would be about $3 billion, but the actual figure announced yesterday was $400 million higher.

Analysts said that figure was a small surprise and suggested IBM was moving rapidly on its employment cutbacks. About 29,000 employees left IBM last year.

Although IBM's stock has moved up strongly in recent days on rumors that the company's year-end report would be more positive than expected, it swung wildly yesterday after the company reported its results.

Immediately after the announcement early in the morning the stock fell as low as $92 a share, but it swung back as high as $98 a share about noon after the company held a conference call with Wall Street analysts. In the call, the company said it had an inventory write-off that accounted for about 25 cents a share in earnings, which would be equal to $200 million to $250 million.

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