IBM turns in $2.7bn profit

IBM beat expectations for its fourth-quarter earnings on Thursday, thanks to higher sales across most of its product groups, which helped boost revenue by 9 per cent.

The company said its fourth-quarter profit jumped 41 per cent to $2.7bn or $1.56 per share for continuing operations, six cents higher than expected. Revenue totaled $25.9bn, also slightly higher than expected, for the quarter ending 31 December.

During the same period a year ago, IBM posted a profit of $1.9bn or $1.11 per share on revenue of $23.7bn. IBM's net profit for the fourth quarter, including discontinued operations, was $2.7bn or $1.55 per share, compared with a 59 cent per share or $1bn profit, including a $1bn after-tax charge, in 2002.

Analysts expected Big Blue to report a profit of $1.50 a share on revenue of $25bn, according to a survey by earnings tracking firm First Call.

For all of 2003, IBM posted a profit of $4.34 per share or $7.6bn, excluding discontinued operations; and revenue of $89.1bn from continuing operations. The earnings-per-share and revenue figures each represent a 10 per cent increase from 2002's earnings of $3.07 per share or $5.3bn, and revenue of $81.2bn.

Including discontinued operations, IBM's 2003 profit was $7.6bn or $4.32 per share, compared with $3.6bn, or $2.06 per share, after charges, in 2002, IBM said.

With only a few exceptions, IBM's businesses pleased the company during the quarter, Sam Palmisano, IBM's CEO, said in a statement.

"IBM's product and services portfolio…is very strong and getting stronger. With few exceptions, the company performed well across the board. Most encouraging is that our On Demand strategy is today a reality. It has entered the mainstream, and it is increasingly driving our business results," the CEO said.

But the company was also helped by the weaker US dollar. IBM's total revenue for the quarter, when measured at constant currency, showed only a one per cent gain, the company explained.

Several of IBM's main business groups saw their revenue jump on a year-over-year basis versus the fourth quarter of 2002.

Global Services' revenue increased 8 per cent to $11.4bn in the fourth quarter. IBM's software revenue increased 12 per cent to $4.3bn. Hardware, which includes high-end servers and mainframes, also rose 12 per cent to $9.1bn.

The company's Personal Systems Group, responsible for its PCs, saw revenue rise by 16 per cent to $3.5bn. The increase was partially attributable to higher shipments of ThinkPad notebooks, IBM said.

But chips continue to dog IBM. Its Technology Group, which includes the IBM Microelectronics chip business, saw revenue decline by 20 per cent to $775m during the quarter. IBM's Global Financing revenue also decreased, sliding 12 per cent to $734m in the fourth quarter.

IBM booked $17.3bn worth of services contracts in the fourth quarter. But, looking ahead, IBM did not include exact figures for its first quarter.

However, "We enter 2004 with good momentum," Palmisano said. "The client buying environment is steadily improving. We are enthusiastic about our prospects for this year and beyond."

John G. Spooner writes for CNET News.com