IBM admitted its European business was weak during its fourth quarter but it defied analysts and increased its quarterly profit by 18 per cent.
Chairman Lou Gerstner said IBM showed good growth "despite a difficult year-on-year comparison, continued weakness in Europe and a greater than expected currency impact".
Despite worries that the strong dollar would hamper its figures, IBM made $2.02 billion in the quarter to 31 December, boosted by rising demand for computer services. Analysts at Morgan Stanley had warned the strength of the dollar in the three-month period could cut IBM?s revenue by up to 25 per cent per share but it only cut absolute figures by three per cent.
But analysts praised IBM for its good figures - they expected IBM to improve slightly on last year?s Q4 figure of $1.7 billion and to report profit of around $1.88 billion.
IBM said all territories increased their revenues except Europe, Middle East and Africa, whose three per cent growth in real terms was cut to zero by the currency fluctuations.
Salomon Brothers predicted IBM will spend $700 million on organisational changes in Europe and that RS/6000 sales will be very strong in the coming months. IBM?s services revenue grew 22.3 per cent to $6.01 billion while software and hardware revenues increased by 3.9 per cent and 1.7 per cent respectively. But low memory chip prices stopped IBM reporting good results all round.
For the first time in recent years IBM decided to release its results after Nasdaq closed to avoid the wild fluctuations in stock that have accompanied its announcements in the past. But sources said IBM stock will fall on Wednesday because the company?s gross margin fell from 41.7 per cent to 40.3 per cent.
For its full year, IBM made $6.02 billion profit, up from $5.86 billion in the previous year, on turnover of $76.95 billion, up from $71.94 in 1995.
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