UPDATE: IBM Beats Wall Street Expectations

Although IBM Corp. today reported earnings for the fourth quarter of 1999 of US$2.1 billion, or $1.12 per share, down from $2.3 billion, or $1.24 per share for the same quarter last year, the company bested Wall Street predictions.

Revenue for the fourth quarter of 1999 totaled $24.2 billion, down 4 percent from $25.1 billion recorded in the year-ago quarter, IBM said in a statement issued today.

Twenty-four analysts polled by First Call/Thomson Financial predicted average earnings per share for IBM of $1.06.

For 1999 as a whole, IBM reported earnings of $7.7 billion, or $4.12 per diluted share, up from $6.3 billion, or $3.29 per share in 1998.

Worries about the impact of the year 2000 (Y2K) problem slowed revenue for the quarter, Lou Gerstner, IBM chairman and chief executive officer, said in the statement. However, the company posted strong year-long business in its services, software and OEM (original equipment manufacturer) technology sectors, he said.

IBM had already warned investors in October of last year to expect lower profits for the fourth quarter of 1999 because of year 2000 problem considerations. The issue will continue to hamper sales into the next quarter, John Joyce, IBM's chief financial officer, said in a teleconference call today.

"The Y2K lockdown was very real and impacted most of our largest customers," Joyce said. "We expect to feel continuing effects of Y2K into the first quarter (of 2000)."

One analyst also related IBM's difficulties to issues related to the year 2000 problem. "There is usually a six-month lag time in which IT organizations plan and budget orders for most IBM products," said Rob Enderle, an analyst with Giga Information Group Inc., in Santa Clara, California. "Most IT organizations planned not to do anything in the six months before or after the New Year."

IBM's fourth quarter revenue in the Americas was $10.4 billion, down 4 percent from the 1998 period; Europe, Middle East and Africa revenue was $7.2 billion, down 15 percent from the year-ago period; Asia-Pacific revenue totaled $4.4 billion, up 12 percent from the same period last year.

OEM revenue for the fourth quarter was $2.2 billion, up 12 percent from the year before period; hardware revenue declined 11 percent to $10.2 billion; software revenue totaled $3.6 billion for the quarter, up 2 percent from the same period last year; and IBM Global Services revenue was $8.7 billion, up 2 percent from the year-ago quarter.

IBM, in Armonk, New York, can be reached at +1-914-499-1900, or at http://www.ibm.com/.

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