AUSTIN EDITION Big Blue in the black with record profit

From staff and news service reports

IBM Corp. closed 2004 with its "strongest fourth quarter ever," pocketing profit of just more than $3 billion and topping Wall Street forecasts.

The world's largest technology company also approached the $100 billion mark in annual sales.

Revenue mounted to a record $96.5 bilion in 2004, producing earnings of $8.4 billion, or $4.93 a common share. Profit was up 11 percent from 2003.

"It was IBM's strongest fourth quarter ever, with earnings exceeding $3 billion for the first time," chairman Sam Palmisano said.


Strong overseas sales and a weak dollar helped generate earnings of $1.80 a common share, about a nickel more than the large group of financial analysts watching the company had expected, according to tracking firm Thomson First Call.

As expected, Big Blue's big sales engine was its Global Service division, which includes consulting, outsourcing and computer support services. It was up 10 percent and accounted for 44 percent of the company's income during the quarter.

Hardware sales rose 4 percent, but the primary machines made at IBM Rochester, the iSeries servers, declined 9 percent.

The company cited a continuing changeover in new products in the fourth quarter for the weakness. However, chief financial officer Mark Loughridge noted "strong customer acceptance of our refreshed Power5 iSeries" as factor in an 80 percent boost in iSeries sales compared to the third quarter.

Meanwhile, the pSeries, which has some machines made in Rochester, was doing well with a 15 percent boost in sales. Particularly popular were the new high-end systems that started shipping in November, Loughridge said.

Meanwhile, the relatively new Engineering and Technology Services unit, IBM's computer designers for hire, turned in an impressive 60 percent gain in fourth quarter business from the same time in 2003. A large part of that work force is based at Rochester. E&TS; revenue for the full year was up 90 percent, Loughridge said.

As 2005 opens, the company will have to cope with soaring costs from retirement benefits.

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