IBM chief Lou Gerstner claims he has tackled his toughest remaining challenge, boosting the company's revenue growth into double figures.
Gerstner told an analysts' meeting that, for several years from fiscal 1999, they could expect double digit revenue increases at IBM, reversing the recent pattern of low growth - last quarter revenues rose by under two per cent, and for fiscal 1997 they were up just 3.4 per cent.
The last time IBM saw double figure increases was 1995, on 12 per cent, and analysts have consistently said that Gerstner - who has turned the giant round in terms of profitability, organisation and product focus - had one remaining vital task, to boost revenue growth.
If his bullish forecasts come good, success will come on the back of services and components - at least if currency fluctuations, a significant factor in the past year's depressed results, are discounted.
He was careful to point out that the forecasts are for 1999 onwards - "don't run out of here and change your 1998 financial models," he warned Wall Street.
Analysts were encouraged by Gerstner's belief that IBM could achieve consistent double digit growth with services alone, since it takes the pressure off the hardware business, where IBM could suffer from tiny margins at the PC end and changing markets at the high end.
Services now accounts for one-quarter of IBM's $78.5 billion revenues and is growing at 20 per cent a year - something Gerstner believes is sustainable for several years. "I have never seen a better growth business than IT services," he said.
The other star of the show is the components unit, which sells chips and storage products on an OEM basis. Its revenues grew 22 per cent to $5.6 billion last year.
And Gerstner is keen to build up the software side, which he now sees as a "major business", even though it only provided four per cent of revenues last year. IBM is likely to make acquisitions in this area and in services, but Gerstner denied rumours that he was looking for a network hardware or PC company.
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