Skip to main content

IBM Announces 1999 Fourth-Quarter, Full-Year Results


ARMONK, N.Y. - 19 Jan 2000: IBM today announced fourth-quarter 1999 diluted earnings per common share of $1.12 compared with diluted earnings per common share of $1.24 in the fourth quarter of 1998. Fourth-quarter 1999 net income was $2.1 billion compared with net income of $2.3 billion in the year-earlier period. IBM's fourth-quarter 1999 revenues totaled $24.2 billion, a decline of 4 percent (2 percent at constant currency) compared with the fourth quarter of 1998.

Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said: "As we had anticipated, the Y2K issue hit us hard in the fourth quarter. Many of our large customers -- who handle much of the world's critical data -- had locked down their computer systems as they prepared for the Y2K transition. While we are pleased that this transition is proceeding smoothly for our customers, these lockdowns had a significant negative impact on our revenues and earnings in the quarter.

"However, the Y2K issue should not overshadow the fact that 1999 was a good year for IBM. We had record net income and earnings per share and our e-business revenues grew at an extraordinary rate. Our e-business services revenues, for example, were up 60 percent from the previous year. We also had very good results on a full-year basis in our strategic growth areas of services, software and OEM technology. In addition, we generated strong cash flows, completed 17 acquisitions and spent $6 billion on capital expenditures.

"As we enter the new year, the e-business revolution is continuing to accelerate at businesses of all sizes throughout the world," Mr. Gerstner said. "IBM -- with the broadest portfolio of products and services in the industry -- is exceptionally well positioned to benefit from this growing e-business demand. We continue to believe that, once the Y2K transition is completed, this can be a very good year for IBM."

In the Americas, fourth-quarter revenues were $10.4 billion, down 4 percent (2 percent at constant currency) from the 1998 period. Revenues from Europe/Middle East/Africa were $7.2 billion, down 15 percent (6 percent at constant currency). Asia-Pacific revenues increased 12 percent (2 percent at constant currency) to $4.4 billion. OEM revenues grew 12 percent (12 percent at constant currency) to $2.2 billion.

Hardware revenues declined 11 percent (10 percent at constant currency) to $10.2 billion from the 1998 fourth quarter. Y2K-related declines in customer demand were a significant factor behind fourth-quarter revenue decreases in System/390, AS/400, RS/6000, and personal computers. However, within IBM's server family, Netfinity PC revenues increased significantly, as did revenues from RS/6000 mid-range servers, including the advanced RS/6000 Model S80. Microelectronics revenues increased substantially, principally due to growth in custom logic shipments. Shipments of IBM's new "Shark" disk storage product were strong in the quarter, although overall storage revenues declined largely as a result of ongoing price pressures in hard disk drives. The overall hardware gross profit margin declined to 26.6 percent from 34.2 percent.

Revenues from IBM Global Services, after normalizing for the 1999 sale of the IBM Global Network to AT&T, increased 7 percent in the quarter (excluding maintenance). On an as-reported basis, revenues for Global Services -- including maintenance and without normalizing for the Global Network sale -- grew 2 percent (4 percent at constant currency) to $8.7 billion. IBM signed $10.3 billion in services contracts in the quarter and concluded the year with a total services contract backlog of approximately $60 billion.

Software revenues totaled $3.6 billion, up 2 percent (6 percent in constant currency) over the prior year's final quarter. Middleware -- which is critical for e-business -- grew 8 percent (13 percent at constant currency), with record fourth-quarter shipments of Lotus Notes and Domino groupware products and strong performance in database, transaction processing, and Tivoli system management software. The software gross profit margin improved 1.1 points year over year to 83.4 percent.

Global Financing revenues increased 19 percent (22 percent at constant currency) in the fourth quarter to $915 million.

Revenues from the Enterprise Investments/Other area, which comprises custom applications and other products designed to meet specialized customer requirements, declined 13 percent (10 percent at constant currency) year over year to $687 million. The revenue decline resulted from IBM's strategy to exit certain non-strategic businesses.

The company's total gross profit margin was 36.7 percent in the 1999 fourth quarter compared with 39.0 percent in the 1998 fourth quarter.

Total fourth-quarter expenses declined 9 percent, and the company improved its expense-to-revenue ratio by 1.5 points year over year to 24.4 percent.

IBM spent approximately $2.1 billion on common share repurchases in the fourth quarter.

The average number of basic common shares outstanding in the quarter was 1.79 billion compared with 1.84 billion in the same period of 1998.

Full-year 1999 Results

Net income for the year ended December 31, 1999 was $7.7 billion, or $4.12 per diluted common share, compared with net income of $6.3 billion, or $3.29 per diluted common share, in 1998. Revenues in 1999 totaled $87.5 billion, an increase of 7 percent as reported and in constant currency, versus revenues of $81.7 billion in 1998.

IBM's full-year 1999 results include an after-tax benefit of $750 million, or $.40 per diluted common share, resulting from several actions that occurred in the year. Specifically, IBM sold its Global Network to AT&T. The company completed several acquisitions which resulted in charges for acquired in-process research and development; took actions intended to improve the long-term competitiveness of the company; and shortened the depreciable lives of personal computers.

In the Americas, full-year revenues were $38.8 billion, up 5 percent (7 percent at constant currency) from the 1998 period. Revenues from Europe/Middle East/Africa were $25.7 billion, an increase of 2 percent (6 percent at constant currency). Asia-Pacific revenues grew 19 percent (8 percent at constant currency) to $15.2 billion. OEM revenues increased 15 percent (14 percent at constant currency) to $7.8 billion.

Hardware revenues in 1999 were $37.0 billion, an increase of 5 percent (4 percent in constant currency). Global Services revenues totaled $32.2 billion, an increase of 11 percent (11 percent at constant currency). Software revenues totaled $12.7 billion, an increase of 7 percent (8 percent at constant currency). Global Financing revenues totaled $3.1 billion, an increase of 9 percent (10 percent at constant currency). Revenues from the Enterprise Investments/Other area declined 2 percent (1 percent at constant currency) year over year to $2.5 billion.

Common share repurchases totaled approximately $7.3 billion in 1999. The average number of basic common shares outstanding was 1.81 billion in 1999 compared with 1.87 billion in 1998. There were 1.78 billion basic common shares outstanding at December 31, 1999.

The company's debt in support of operations, excluding global financing, decreased $104 million from year-end 1998 to $1.6 billion at year-end 1999, resulting in a debt-to-capitalization ratio of 9 percent. Global financing debt declined $1 billion from year-end 1998 to $26.8 billion at year-end 1999, resulting in a debt-to-equity ratio of 5.5 to 1.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, as discussed in the company's filings with the Securities and Exchange Commission.

Financial Results

# # #

Contact(s) information

Rob Wilson
IBM
(914) 499-6565

Related XML feeds
Topics XML feeds
Corporate
Financial news, company earnings, philanthropy, community service, human resources, sponsorship