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Martin LaMonica

Staff Writer, CNET

IBM reported strong fourth-quarter earnings that surpassed analysts’ targets and said it plans to deliver double-digit profit growth this year.

The computing giant said Tuesday that its net income was $3.04 billion for the quarter ended Dec. 31, a rise of 16 percent compared with the same period the previous year. Its earnings of $1.81 per share exceeded the consensus estimate of $1.75 per share given by analysts polled by Thomson First Call.

“IBM delivered a powerful fourth quarter, reflecting the strength of our integrated business model. It was IBM’s strongest fourth quarter ever, with earnings exceeding $3 billion for the first time,” Sam Palmisano, IBM’s chairman and chief executive officer, said in a statement.

Revenue in the quarter grew by 7 percent, or 3 percent at constant currency, to total $27.6 billion. The IBM Global Services consulting unit, which brings in about half the company’s sales, saw its revenue grow 10 percent, or 6 percent in constant currency. IBM’s revenue from its hardware business was up by 4 percent, and from its software business up by 7 percent, year-over-year.

The Armonk, N.Y., company also announced its full-year 2004 results, reporting earnings per share of $4.94–a 14 percent increase compared with 2003.

Those earnings were dampened by a pension settlement, which IBM recognized in the third quarter of 2004. The cost of the settlement is estimated at about $1 billion, Mark Loughridge, IBM’s chief financial officer and senior vice president, said in a conference call.

Taking out one-time payments related to the pension settlement, 2004 earnings per share would have been $5.05. In the most recent survey, financial analysts expected the company to return $5.01 per share for the year.

Loughridge said IBM can maintain double-digit growth in earnings in the coming year. He said a 5 percent increase in revenue, aided by improved productivity and stock repurchasing plan, will result in 10 percent growth in profit. Organic growth, stemming from IBM’s product upgrades and continued expansion in emerging markets, will drive sales, he said. He noted that, in general, corporate spending on technology remains steady.

Addressing IBM’s sale of its PC business, Loughridge said the company intends to continue its strategy of investing in “higher-value” product and services areas and of investing away from commodities such as PCs. IBM made 14 acquisitions in 2004, all of which were in the software and services area.

At the close of regular trading, IBM shares were up $0.80 to $94.90.