Slumping PC and hardware sales cause IBM revenue drop

Slumping PC and hardware sales cause IBM revenue drop

For the second quarter in a row, IBM reported sharp year-over-year declines in revenue and net income. Big Blue still managed to edge past analysts' expectations, however, and turned a US$2.3 billion profit for the fourth quarter of 2001.

IBM's 11 per cent year-over-year revenue drop, to $22.8 billion, was caused primarily by slow PC sales and weakness in the company's OEM (original equipment manufacturer) business, Chairman and Chief Executive Officer Lou Gerstner said in a statement accompanying IBM's financial release. IBM's OEM revenue dropped 34 per cent from its fourth-quarter 2000 total.

Even IBM's highly-regarded Global Services consulting unit suffered from the market crunch: Revenue from the unit declined 1 per cent year-over-year, to $9.1 billion, although the unit's gross profit margin improved slightly.

Hardware revenue dropped 24 per cent from the fourth quarter of 2000, to $8.7 billion, while revenue from IBM's z900 line of mainframe servers was essentially flat. There were a few bright spots in the troubled sector: On a full-year basis, IBM's mainframe revenue grew for the first time since 1989, the company said, and its newly introduced Regatta Unix servers are sold out.

IBM's software business stayed strong despite the market downturn, with revenue growing 6 per cent year-over-year to $3.8 billion, the company said. Revenue from IBM's data management software increased 48 per cent, while WebSphere revenue grew 43 per cent.

IBM also reported its full-year 2001 results, posting net income of $7.7 billion, down from $8.1 billion in 2000. Revenue for 2001 totaled $85.9 billion, a 3 per cent decline from 2000's $88.4 billion.

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