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IBM misses revenue mark
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January 17, 2002: 6:12 p.m. ET
Computer maker edges past 4Q profit forecast on weaker-than-expected sales.
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NEW YORK (CNN/Money) - IBM posted a drop in fourth-quarter earnings that were slightly better than analysts' profit forecasts, but missed their revenue forecast by $1 billion.
The company Thursday reported it earned $2.3 billion, or $1.33 a diluted share, in the quarter, which was a penny better than the earnings-per-share forecast of analysts surveyed by results tracker First Call. The company earned $2.7 billion, or $1.48 a diluted share, in the year-earlier period.
Revenue fell 11 percent to $22.8 billion from $25.6 billion a year earlier. That was well below First Call's revenue forecast of $23.8 billion. The company said that the revenue decline came mostly from slow personal computer sales and weakness in sales of components, such as hard disk drives, to other computer makers.
That revenue shortfall sent IBM (IBM: Research, Estimates) shares down $5.20, or 4.3 percent, to $114.70 in after-hours trading following the earnings report, wiping out the gain of $2.65 in the regular session.
Company executives tried to put the best face on the revenue shortfall, saying it came from segments of a business that was not the main driver of profits and that it is well positioned for earnings growth this year.
"The weak revenue performance of the PCs and HDDs (disk drives), both down about 35 percent year-to-year, has little bearing on our earnings per share," said IBM Chief Financial Officer John Joyce in comments to analysts. He said the current consensus forecast of $4.81 for 2002 "is reasonable." The company logged a profit of $4.35 for 2001.
"Business conditions remain difficult as we enter the new year, although we believe that our business will strengthen as we move through the year," said a statement from IBM Chief Executive Louis Gerstner.
Joyce told analysts that while the revenue in segments such as personal computers and hardware components were off year-over-year, they saw revenue growth from the third quarter levels, "suggesting we've hit bottom."
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Joyce said that revenue growth was strong in the company's key profit segments, such as software and outsourcing contracts, and said the pipeline of new products and new contracts is as strong as the company has seen them.
"The fourth quarter signings and converting the strong pipeline into contracts should have a positive impact on 2002 revenue growth," he said. "We've been through these dynamics before, a slowdown in signings and revenue, followed by recovery, back with Y2K. But with our skills and capabilities we will continue to gain market share." 
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