New investments drive IBM growth

New investments drive IBM growth

IBM has reported net income for the fourth quarter of 2003 of $US2.7 billion, up from $US1 billion in the same period of 2002.

The company reported revenue growth of 9.4 per cent on figures of $US25.9 billion for the three months ended December 31, 2003, up from $US23.7 billion in the year-ago period.

The prior year period included $US1 billion in after-tax charges, with $US405 million of that related to the company's acquisition of Pricewaterhouse Coopers' Consulting business (PWCC), IBM said.

Without the PWCC charges, earnings rose 16 per cent over the year-ago period, the company said.

The company's financial performance owes to investments made during the economic downturn that helped position IBM for a rebound, chairman and chief executive officer, Sam Palmisano, said.

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

The company 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 per cent to $US3.4 billion in the fourth quarter, the company said.

This was likely to be a good year as the IT industry began its next growth cycle, Joyce said.

The industry stabilised in 2003, after several years in decline, and IBM was in a good position to take advantage as growth began, he said. IBM's On Demand computing strategy was in place and gave the company a competitive advantage, he said.

On Demand service grants companies access to computing resources, both capacity and software, as they need them, so that they only pay for the services they use.

Revenue from the Global Services group rose 8 per cent and IBM signed $US17.3 billion in services contracts in the fourth quarter, it said. This included three contracts of more than $US1 billion and 18 more than $US100 million.

Hardware revenue grew 12 per cent year-on-year and the high-end zSeries range, particularly the z990 products, "has legs going into 2004," Joyce said.

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

The Personal Systems Group recorded a revenue rise of 16 per cent to $3.5 billion, as increased sales of mobile products offset lower prices. ThinkPad sales were strong. Revenue was up 35 per cent year-on-year, compared to a fall of 6 per cent in desktop revenue.

The company was being forced, through competitive pressure, to reduce prices for lower-end servers and PCs in Asia and Europe, but the currency differences would mean there was little effect on the bottom line, Joyce said.

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