IBM Announces Fourth Quarter, Full-Year 1997 Results; Revenues, Earnings Per Share were Records in 1997
ARMONK, N.Y (January 20, 1998) – IBM today announced fourth-quarter 1997 net earnings of $2.1 billion, or $2.16 per common share, an earnings per share increase of 10 percent compared with net earnings of $2.0 billion, or $1.97 per common share, in the fourth quarter of 1996. Fourth-quarter 1997 revenues increased 3 percent (8 percent at constant currency) year over year to a record $23.7 billion.
Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said: “We had a strong quarter that closed out a very good year. Our strategic priorities were increasingly evident in our marketplace results. Our services business continued its excellent growth rate of more than 20 percent for the year. The momentum of our software business grew throughout 1997, and we ended the year with an exceptionally strong performance from our Lotus Notes, Tivoli, and database software products. In addition, our strategy to exploit IBM’s technological base continued to be successful, particularly in storage products, and in 1997 we repositioned our server product lines from top to bottom.
“Our results are especially satisfying,” Mr. Gerstner said, “because they were achieved despite a number of very difficult factors, including an increasingly negative currency impact, weakness in some Asian markets, and pricing pressures that affected certain product areas. We remain comfortable with our strategies, with the fundamental strength of our business, and with our long-term business and financial model.”
On an as-reported basis, fourth-quarter revenues from North America were $10.4 billion, up 9 percent from the same period of 1996. Asia-Pacific revenues were essentially flat at $4.4 billion (up 10 percent at constant currency). Revenues from the company’s Europe, Middle East, and Africa unit declined 4 percent (up 5 percent at constant currency) to $7.7 billion. Latin America revenues grew 4 percent to $1.2 billion (up 7 percent at constant currency).
Total hardware sales declined 1 percent (up 4 percent in constant currency) year over year to $11.5 billion. In as-reported terms, RS/6000, storage and semiconductor revenues increased while overall PC, AS/400 and System/390 revenues declined. On a constant currency basis, hardware sales increased in all key hardware lines, with the exception of the System/390 and consumer PCs.
Services revenues totaled $5.9 billion, an 18 percent increase (up 24 percent in constant currency) compared with the year-earlier period. Approximately $8.5 billion in new services contracts were signed in the quarter, and services margins were essentially flat year over year at 22.5 percent.
Overall software revenues were $3.8 billion, an increase of 1 percent (up 7 percent in constant currency) compared with the fourth quarter of 1996. Approximately 4 million Lotus Notes seats were shipped in the quarter, more than double that of the fourth quarter of 1996. Tivoli distributed software revenues also doubled year over year. During the fourth quarter, IBM completed its acquisition of Unison Software, Inc., and announced plans to acquire Software Artistry, Inc., both of which will complement Tivoli’s network computing offerings.
Maintenance revenues declined 9 percent (down 4 percent in constant currency) to $1.6 billion in the fourth quarter, compared with the year-earlier period, and rentals and financing revenues fell 4 percent (up 1 percent in constant currency) to $1.0 billion.
IBM’s overall gross profit margin in the fourth quarter was 40.1 percent compared with 40.3 percent in the year-earlier period.
Total fourth-quarter 1997 expenses increased 1 percent year over year. The expense to revenue ratio in the fourth quarter of 1997 was 27.4 percent compared with 27.8 percent in the year-earlier period.
The company’s tax rate was 30.5 percent in the fourth quarter compared with 29.9 percent in the fourth quarter of 1996.
IBM spent approximately $2 billion on share repurchases in the fourth quarter. The average number of shares outstanding in the fourth quarter of 1997 was 964.8 million compared with 1,026.8 million in the year-earlier period.
Source: IBM