Compaq and IBM both reported strong fourth quarter earnings last week but while Compaq's shares rose as the news broke, IBM's fell sharply as Wall Street reacted with obvious disappointment.
Despite a rise in net income to $2.02 billion (#1.18 billion) from $1.71 billion in the year earlier quarter, shares in IBM fell following the news as disappointed investors punished the company after the increase in fourth quarter sales failed to meet Wall Street expectations.
Although IBM beat the average earnings forecasts of analysts when it released its figures for the quarter last Tuesday, the company's profit margins showed a decline from the same period a year ago.
Despite this IBM had a generally strong, across-the board performance with the PC and services businesses performing particularly well.
Senior vice president and chief financial officer Rick Thoman, commented: "This was another best quarter for the PC company. We closed the gap once again with gross profit margins."
Thoman also said IBM's server line had registered a "generally good performance" with demand for the System 390 family up more than 80% over the third quarter.
Software revenues, however, grew only 3.9% to $3.7 billion, while computer hardware revenues were up just 1.7% at $11.6 billion.
Compaq, on the other hand, reported earnings well in excess of analysts' predictions. Net earnings for the quarter rose 43% from $322.9 million to $462.3 million, excluding an acquisition charge from the previous fourth quarter. Worldwide sales grew to a record $5.4 billion, up 15% from the year before.
Eckhard Pfeiffer, president and chief executive officer at Compaq, said he expected the growth to continue throughout 1997: "Compaq is in a position to gain market share and increase profits. We are clearly focused on the high-growth segments of the IT industry with products like our new industry standard NT-based professional workstations - a market segment that's forecast to grow more than 40% a year up to the year 2000."
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