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IBM tops expectations for fourth quarter

Big Blue's profits top analysts' expectations by 6 cents, thanks to higher sales of services, PCs, servers--and software.

IBM beat expectations for its fourth-quarter earnings on Thursday, thanks to higher sales across most of its product groups, which helped boost revenue by 9 percent.

The company said its fourth-quarter profit jumped 41 percent to $2.7 billion or $1.56 per share for continuing operations, 6 cents higher than expected. Revenue totaled $25.9 billion, also slightly higher than expected, for the quarter ending Dec. 31.

During the same period a year ago, IBM posted a profit of $1.9 billion or $1.11 per share on revenue of $23.7 billion. IBM's net profit for the fourth quarter, including discontinued operations, was $2.7 billion or $1.55 per share, compared with a 59 cent per share or $1 billion profit, including a $1 billion after-tax charge, in 2002.

Analysts expected Big Blue to report a profit of $1.50 a share on revenue of $25 billion, according to a survey by earnings tracking firm Thomson First Call.

For all of 2003, IBM posted a profit of $4.34 per share or $7.6 billion, excluding discontinued operations; and revenue of $89.1 billion from continuing operations. The earnings-per-share and revenue figures each represent a 10 percent increase from 2002's earnings of $3.07 per share or $5.3 billion, and revenue of $81.2 billion.

Including discontinued operations, IBM's 2003 profit was $7.6 billion or $4.32 per share, compared with $3.6 billion, or $2.06 per share, after charges, in 2002, IBM said.

With only a few exceptions, IBM's businesses pleased the company during the quarter, Sam Palmisano, IBM's CEO, said in a statement.

"IBM's product and services portfolio?is very strong and getting stronger. With few exceptions, the company performed well across the board. Most encouraging is that our On Demand strategy is today a reality. It has entered the mainstream, and it is increasingly driving our business results," the CEO said.

But the company was also helped by the weaker U.S. dollar. IBM's total revenue for the quarter, when measured at constant currency, showed only a 1 percent gain, the company explained.

Several of IBM's main business groups saw their revenue jump on a year-over-year basis versus the fourth quarter of 2002.

Global Services' revenue increased 8 percent to $11.4 billion in the fourth quarter. IBM's software revenue increased 12 percent to $4.3 billion. Hardware, which includes high-end servers and mainframes, also rose 12 percent to $9.1 billion.

The company's Personal Systems Group, responsible for its PCs, saw revenue rise by 16 percent to $3.5 billion. The increase was partially attributable to higher shipments of ThinkPad notebooks, IBM said.

But chips continue to dog IBM. Its Technology Group, which includes the IBM Microelectronics chip business, saw revenue decline by 20 percent to $775 million during the quarter. IBM's Global Financing revenue also decreased, sliding 12 percent to $734 million in the fourth quarter.

IBM booked $17.3 billion worth of services contracts in the fourth quarter. But, looking ahead, IBM did not include exact figures for its first quarter.

However, "We enter 2004 with good momentum," Palmisano said. "The client buying environment is steadily improving. We are enthusiastic about our prospects for this year and beyond."