Big Blue, Big Lo

January 20, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- IBM joined the club of last year's multibillion-dollar losers, reporting record losses yesterday of 33 $4.96 billion for 1992 after accounting for one-time charges related to cutbacks and layoffs.

The computer giant, which had prepared its 750,000 shareholders for the bad news last month, performed slightly worse than expected. For the first time in its 79-year history, International Business Machines Corp. recorded a quarterly operating loss on declining revenues and plummeting sales in key product lines.

"Our financial results are not acceptable to us or our shareholders," IBM Chairman John F. Akers said, adding that the company was taking "aggressive" steps to rectify the situation.

The $5 billion loss, so far the highest in U.S. corporate history, worked out to $8.70 a share. In 1991, IBM lost $2.86 billion, or $5.01 a share. Revenue fell 0.4 percent last year, to $64.52 billion, from $64.77 billion in 1991.

Although the results were generally in line with expectations, IBM stock fell $1.125 yesterday, to $48.375, with 5 million shares changing hands.

In addition to the 1992 figures, numbers for the year's last three months were also released. During that period, the company lost $5.46 billion, including a $45 million operating loss and a one-time $7.2 billion charge to pay for early pensions, severance pay and other costs associated with cutting its work force.

More than 40,000 IBM employees were let go last year through voluntary means. An additional 25,000 are due to go this year, some through a break in the company's vaunted no-layoff policy.

About 100,000 workers have been cut since 1986, when the company had 400,000 employees.

IBM was caught flatfooted by computer users' switch to networks of smaller computers from mainframe computers, IBM's strength. Most of the company's cutbacks have been in the mainframe business.

Although many Wall Street analysts believed that IBM was cutting costs fairly quickly for a big company, they were disappointed that revenues sagged 11 percent in the fourth quarter, which is usually the company's strongest period.

"The products that are growing have lower profit margins, so the revenues don't improve much," said Mark C. Jordan of A. G. Edwards Inc.

Hardware sales, for example, have been especially hit by pricing wars, with IBM's sales down 20 percent during the last three months of 1992.

While mainframes were thought to have been responsible for much of that loss, sales of IBM personal computers were down 18 percent last year, according to Dataquest, a California computer company tracking service.

"As you look at the numbers, you begin to get really concerned. This is going to be a problem for years and isn't related to the economy. We're looking at a fundamental, long-term erosion," said Joseph Payne, an analyst with Alex. Brown & Sons Inc.

IBM did little to dispel the gloom during a conference call with more than 200 analysts yesterday morning. Company officials said industry price wars were bound to limit profits further.

Officials also did not comment on the fate of its hefty $4.84-per-share dividend, which will be on the agenda at a Jan. 26 board meeting. Most analysts expect the dividend to be cut in half.

In a statement, Mr. Akers promised yesterday to turn things around at the company by focusing on key growth areas, such as computer networking; further encouraging IBM's 13 divisions to exercise more autonomy; and, cutting costs further.

A LOT OF RED INK

International Business Machines Corp.'s loss of $4.96 billion for 1992 is the largest annual loss by a U.S. company.

3' The 10 biggest losses, in billions:

Company .. .. .. Year .. Loss

IBM .. .. .. .. 1992 .. $4.96

.. .. .. .. ..1991 .. $4.45

Texaco.. .. .. ..1987 .. $4.41

LTV.. .. .. .. ..1986 .. $3.25

LTV.. .. .. .. ..1988 .. $3.15

IBM.. .. .. .. ..1991 .. $2.86

Digital Eq. .. ..1992 .. $2.80

Continent. Air ..1990 .. $2.34

Ford .. .. .. .. 1991 .. $2.26

.. .. .. .. ..1990 .. $1.99

So: Standard & Poor's Compustat Services Inc.

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