In a fourth quarter that included expensive charges primarily related to its acquisition of PricewaterhouseCoopers Consulting (PwCC), IBM Corp. Thursday posted growing revenue but declining income, which Chairman and Chief Executive Officer Sam Palmisano characterized as strong in "one of the most challenging years in business."
Including US$405 million in charges, IBM reported fourth-quarter income from continuing operations of US$1.9 billion, down from US$2.6 billion in 2001's fourth quarter. Excluding the charges, IBM's continuing-operations income would have been US$2.3 billion.
Revenue from continuing operations for the quarter, which ended Dec. 31, was US$23.7 billion, up 7 percent from US$22.1 billion in the year-ago quarter.
The consensus estimate of analysts polled by Thomson Financial/First Call had been for US$1.30 in per-share earnings. IBM's actual per-share earnings from continuing operations were US$1.11; however, excluding the PwCC charges, per-share earnings would have been US$1.34.
PwCC's affect on IBM's bottom line was immediately clear this quarter: After several quarters of slight declines, IBM's Global Services unit (into which PwCC was integrated) generated 17 percent year-over-year revenue growth, to US$10.6 billion. New contract signings also surged sequentially, from US$9 billion in the third quarter of 2002 to US$18 billion in the fourth.
That total includes a seven-year, US$5 billion outsourcing agreement with J.P. Morgan Chase & Co., under which IBM will absorb several thousand J.P. Morgan employees and assume responsibility for a wide array of the financial services firm's IT needs.
IBM also reported its full-year 2002 results, showing a significant decline in income from continuing operations. IBM's reported income plunged from US$8.1 billion in 2001 to US$5.3 billion in 2002. However, that drop includes US$1.5 billion in charges for PwCC's integration and restructuring in IBM's microelectronics division.
Revenue for the full year was down 2 percent, at US$81.2 billion, following 2001's US$83.1 billion total.