Forward planning boosts IBM's quarterly income

IBM has reported net income of $2.7bn for its 2003 fourth quarter, up from $1bn for the same period in 2002.

IBM has reported net income of $2.7bn for its 2003 fourth quarter, up from $1bn for the same period in 2002.

The company reported revenue growth of 9.4%, with $25.9bn for the three months ending 31 December 2003, up from $23.7bn a year ago.

Chairman and chief executive officer Sam Palmisano said IBM's financial performance was boosted by investments made during the economic downturn that helped position IBM for a rebound.

The previous quarter included $1bn in post-tax charges, with $405m of that related to IBM's  acquisition of Pricewaterhouse Coopers Consulting business. Without the PWCC charges, earnings rose 16% on the same period a year ago.

The purchase of PWCC in 2002 was the first step to building IBM's capabilities in business outsourcing, which IBM expects to be key to its future revenue growth and profitability, said senior vice president and chief financial officer John Joyce.

IBM also bought Rational Software in February 2003 and Think Dynamics in May. Rational has become the fifth middleware brand within IBM's software group, joining Lotus, WebSphere, Tivoli and DB2, while Think Dynamics automated server provisioning business has been integrated into the Tivoli division.

Revenue from the middleware brands increased 14% to $3.4bn in the fourth quarter.

Joyce said IBM's On Demand computing strategy is in place and gives the company a competitive advantage.

Revenue from the Global Services group rose 8% and IBM signed $17.3bn in services contracts in the fourth quarter. Hardware revenue grew 12% year on year and the high end zSeries range, particularly the z990 products, "has legs going into 2004", Joyce promised.

XSeries Intel-processor based servers and pSeries Unix-based servers also saw increased revenue.

The Personal Systems Group saw revenue rise 16% to $3.5bn, as increased sales of mobile products offset lower prices. ThinkPad sales have been strong,  with revenue up 35% year on year, compared with a fall of 6% in desktop revenue.

Joyce admitted that competitive pressurehas forced IBM to reduce prices for lower-end servers and PCs in Asia and Europe, but added that the currency differences will mean there is little effect on the bottom line.

In the Americas, revenue from continuing operations rose 4% from 2002, to $10.6bn, while revenue in Europe, Middle East and Africa (EMEA) rose 17%  to $9.1bn. Asia-Pacific revenue rose 13% to $5.4 billion.

Gillian Law writes for IDG News Service

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