IBM sales rose 7% in 4Q

Pricewaterhouse deal trimmed profit 26%

Earnings fell to $1.11 a share, from $1.46

January 17, 2003|By BLOOMBERG NEWS

ARMONK, N.Y. - International Business Machines Corp., the world's largest seller of computers and related services, said its fourth-quarter sales rose 7 percent, but its profit dropped because of acquisition costs.

Profit from continuing operations declined 26 percent to $1.91 billion, or $1.11 a share, from $2.57 billion, or $1.46, in the fourth quarter of 2001, IBM said.

Sales increased to $23.7 billion from $22.1 billion, helped by the October purchase of PricewaterhouseCoopers LLP's business consulting unit.

Samuel J. Palmisano, IBM's chief executive officer, has been trying to revive sales by adding new products and service offerings, partly through acquisitions. IBM's sales topped the $23.2 billion average analyst estimate as services revenue rose 17 percent to $10.6 billion and sales of software gained 0.4 percent to $3.8 billion.

"Beating an estimate by half a billion dollars in a quarter is impressive," said Ned Riley, who helps manage $110 billion at State Street Global Advisors, which owns IBM shares.

Excluding results from a sold computer disk-drive business and costs related to the PricewaterhouseCoopers purchase, IBM said, it would have earned $1.34 a share. On that basis, it was expected to earn $1.30, the average First Call estimate.

"I would call it a stabilization of technology spending," Chief Financial Officer John R. Joyce said in an interview.

"We continue to gain share in all of our critical business segments," including "most of software, servers and services."

IBM's shares fell $1.54 to close at $86.05 on the New York Stock Exchange trading, and dropped to $84.05 in after-hours trading. IBM dropped 36 percent last year, its steepest decline since 1992.

The company said its hardware sales rose 1 percent to $8.1 billion. IBM has been introducing new servers, cutting prices and turning to outside contractors to help cut costs amid competition from rivals such as Dell Computer Corp. and Hewlett-Packard Co.

"We're pretty pleased with this," said John Rutledge, who helps manage $230 billion for Wachovia Corp.'s Evergreen Investment, which includes more than 2.5 million IBM shares. "IBM is doing better than most of its competitors."

IBM's net income dropped 56 percent to $1.02 billion, or 59 cents a share, from $2.33 billion, or $1.33, a year earlier.

IBM will reduce the expected rate of return on its pension plan assets to 8 percent this year form 9.5 percent last year, IBM's Joyce said in a conference call with investors and analysts.

The company paid $3.95 billion in cash and stock in the quarter to fill a deficit in its U.S. employee pension plan, IBM's first contribution in seven years.

Joyce said in October that the company would lower the expected rate of return in its pension fund to 8 percent to 8.5 percent.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.