18 January 2002 Systems giant IBM posted revenues down by more than a tenth in its fourth quarter to the end of December 2001 and by 2.9% for the full year. CEO Lou Gerstner attributed the performance to falling PC and server sales.
Revenue fell 10.9% to $22.83 billion (€25.91bn) from $25.62 billion (€29.1bn) in the fourth quarter a year earlier. Net income dropped 12.7% to $2.33 billion (€2.64bn), compared to $2.67 billion (€3.03bn)in the same period a year earlier.
The decline in revenues and net income for the full year was less dramatic. Sales fell by 2.9% to $85.87 billion (€97.47bn) compared to $88.4 billion (€100.35bn) in 2000. Full year profits slipped by just 0.9% to $31.78 billion (€36.08bn) compared to $32.05 billion (€36.38bn) in 2000.
IBM’s fourth quarter was marked by a particularly poor performance in its hardware division, where sales fell by 24% to $8.71 billion (€9.89bn) compared to $11.46 billion (€13bn) in the fourth quarter of 2000.
Gerstner attributed this to a sharp drop in PC shipments, allied to disappointing sales of both mainframe and Unix server hardware. Deteriorating PC sales persuaded Gerstner to outsource most of IBM’s PC maker operations to contract manufacturer Sanmina-SCI just last week. IBM has struggled to turn a profit from its PC operations for many years.
In addition, Unix server sales had been disrupted by the 14 December release of IBM’s new Regatta family of servers. While the new hardware was met with approval from analysts, many customers deferred purchases until after the launch.
Meanwhile, software revenues rose by 6% to $3.8 billion (€4.31bn) compared to the previous year’s fourth quarter. Middleware product sales grew by 10% and data management and WebSphere application infrastructure software sales jumped by 48% and 43% respectively.
Surprisingly, services revenues also fell, albeit marginally by 1.4% to $9.06 billion (€10.29bn). IBM Global Services has grown strongly in recent years and the decline in revenues from this source, which Gerstner attributed to the slow down in IT spending, came as a surprise.
However, IBM chief financial officer John Joyce forecast that services revenues would pull ahead during 2002. Based on business already in the pipeline, the services division would record “double-digit growth” in 2002, he said.