IBM ends '93 with a profit

January 26, 1994|By New York Times News Service

NEW YORK -- IBM reported its first quarterly profit in more than a year yesterday, a sign that the struggling computer company may be starting to recover.

Fourth-quarter earnings of $382 million at IBM were in line with analysts' expectations. But IBM executives and analysts stressed that any recovery at IBM would be a gradual process.

Louis V. Gerstner Jr., who became chairman last spring, said yesterday that after he joined IBM the company began a "two-part plan" to return to profitability and develop new strategies for each of its businesses. "We are making progress on both fronts," he said.

Most analysts agreed and cautioned against reading too much into improvement in a single quarter. "This is a good finish to Gerstner's first nine months at IBM, but there are many more battles to fight," said Bob Djurdjevic, president of Annex Research in Phoenix.

IBM's profit during the fourth quarter of 1993 of $382 million, or 62 cents a share, was an improvement from recent losses. But it pales in comparison with the once-dominant company's performance just a few years ago.

In the fourth quarter of 1990, the last strong financial year for IBM, the company reported earnings of $2.46 billion.

For all of 1993, IBM lost $8.15 billion, one of the largest yearly losses in American corporate history. The huge loss was mainly attributable to a $8.9 billion charge against earnings last summer for shedding factories, equipment and workers.

At the end of last year, IBM's worldwide payroll was 256,000, a decline of 45,000 from the end of 1992.

The company's share price fell sharply after yesterday's announcement, down more than $3 at one point, but bounced back later in the day to close at $58.25, off only 37.5 cents, on the New York Stock Exchange.

A strong American market bolstered IBM during the fourth quarter, with total revenue from hardware, software and services increasing 9 percent. But the strength in the United States did not quite offset revenue declines in Europe, down 1 percent, and Asia, off 4 percent. Revenue slipped 1 percent, to $19.4 billion, for the company overall.

"IBM still has a revenue problem," said Stephen K. Smith, an analyst for Paine Webber Inc. "It's not a growth business."

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