Y2K slowdown hits IBM's bottom line

After several boon years of sales driven by millennium bug remediation, IBM has suffered a significant Y2K hangover, announcing a drop in turnover and profits for the fourth quarter of 1999.

Worldwide, the vendor generated revenues of $US24.2 billion for the fourth quarter ended December 31, 1999, down 4 per cent from the same period the year before.

Profits also took a slide, with IBM's net income totalling $US2.1 billion, compared to $US2.3billion for the fourth quarter of 1998.

Declines in global demand for IBM's System/390, AS/400, RS/6000, PCs and storage products hit the company's bottom line during the quarter, although services and software revenues increased.

Regionally, Europe, the Middle East and Africa (EMEA) and the Americas also suffered badly, with revenues decreasing by 15 per cent and 4 per cent respectively.

However the news was better locally, with the Asia Pacific region improving its turnover by 12 per cent year-on-year to $US4.4 billion.

Asia-Pacific revenues for the year also grew 19 per cent to $US15.2 billion.

David Thodey, managing director of IBM Australia, said the regional success was reflected in the local operations, which achieved record revenues courtesy of strong demand for outsourcing and systems integration services.

Thodey said IBM Australia "saw some slowness" in the fourth quarter of 1999 because of Y2K.

But he added: "We expect to see strong services revenues going forward and increased demand for products as people come out of Y2K."

Lou Gerstner, chairman and CEO of IBM, was similarly optimistic about the company's prospects in 2000.

"We believe that, once the Y2K transition is completed, this can be a very good year for IBM," he said.

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