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IBM loses $515 million on hard drives

Big Blue says that for the past five quarters it booked a total after-tax loss of $515 million from its discontinued hard drive operations.

IBM's hard drive business, which the company is selling to Hitachi, lost $515 million in the five most recent quarters, Big Blue disclosed Tuesday in a regulatory filing.

The business lost $423 million in 2001, with $232 million of that in the fourth quarter alone, IBM said. In the first quarter of 2002, the hard drive business lost $92 million.

IBM reported the loss while detailing how the $2.05 billion sale of the unit will change previous financial statements.

IBM and Hitachi announced June 4 that the two companies would transfer their hard drive business to a separate company, to be majority-owned by Hitachi. The 24,000-employee company will be based in San Jose, Calif., with Hitachi making payments to IBM for three years before taking full control.

IBM plans to disclose more financial details July 17, when it announces second-quarter results. At that time, the company will describe a charge of between $2 billion and $2.5 billion to cover its exit from the hard drive business, layoffs, write-offs in its processor group and other costs.

IBM has been under scrutiny recently for how much financial information it disclosed in recent quarters.

The dissolution of the hard drive operations included sales to computer equipment makers and, in some cases, to IBM for use in its own server and storage products, the company said.

Factoring out the hard drive business, IBM in 2001 had net income of $7.7 billion and revenue of $83 billion. For the first quarter of 2002, it reported net income of $1.2 billion and revenue of $18 billion.