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Report Lower 4th-Qtr Profit Tomorrow as Y2K Reduced Mainframe Sales By Jeff Bliss

Armonk, New York, Jan. 18 (Bloomberg) -- International Business Machines Corp. will report lower fourth-quarter earnings tomorrow as customers delayed buying mainframes from the world's No. 1 computer maker to focus on Year 2000 issues.

IBM warned in October that earnings would fall, when it said profit would be 15 cents to 20 cents below the year-earlier period's. Analysts expect that profit dropped to $1.06 a share, the average estimate from First Call/Thomson Financial. That compares with a split-adjusted $1.24 in the fourth quarter of 1998. Sales were unchanged at $25 billion, analysts said.

Mainframes run the most complex functions in a business and companies were reluctant to buy new ones until they determined the impact of the Year 2000 date rollover. Analyst Kurt King at Banc of America Securities estimates that IBM's fourth-quarter mainframe sales tumbled as much as 87 percent to $200 million from $1.5 billion a year earlier. ``It was a completely unusual quarter because of the Year 2000,'' said King, who rates IBM a ``strong buy.'' ``Mainframes were very weak.''

Unisys Corp., an IBM mainframe rival, said today its fourth- quarter sales dropped almost 5 percent as customers delayed purchases because of Year 2000 issues.

-- Dee (T1Colt556@aol.com), January 18, 2000