) 2000 Oregon Live.

IBM reports drop in profit, revenue as computer sales get hit by Y2K

By DAVID E. KALISH The Associated Press

01/19/00 5:26 PM Eastern

NEW YORK (AP) -- IBM reported a 11 percent drop in fourth-quarter profit and a 4 percent decline in revenue on Wednesday, as sales of business computers were dragged down by uncertainty over the Y2K bug.

IBM's profit easily exceeded Wall Street's expectations, but the company said lingering concern over the Y2K bug will continue to take its toll on sales in the current quarter.

International Business Machines Corp., based in Armonk, N.Y., said its profit in the three months ended Dec. 31 fell to $2.09 billion, or $1.12 a share, beating the $1.06 a share forecast by analysts surveyed by First Call/Thomson Financial. That was down from a profit of $2.35 billion, or $1.24 a share, in the year-ago quarter.

Revenues fell to $24.18 billion from $25.13 billion, dragged down by a 11 percent drop in hardware sales at the world's largest computer company. The results reflected a tumble in sales of computer servers, powerful machines at the hub of corporate technology networks.

Many technology managers held off from buying these computers or bought them earlier last year so that they could make sure their systems were free of the Y2K date-change bug.

"As we had anticipated, the Y2K bug hit us hard in the fourth quarter," IBM chief executive Louis V. Gerstner said. He said that IBM should have a "very good year" in 2000 as corporate customers resume buying hardware, and IBM's sales of e-commerce software and services take off.

However, IBM will continue to get hit by slow sales in the first quarter of this year, and per-share profits in the period are expected to be flat to slightly below the year-ago quarter, IBM chief financial officer John Joyce said in a conference call.

Before IBM released its earnings after the market had closed, shares were down 25 cents at $115.50 on the New York Stock Exchange. IBM stock has fallen 4 percent this past week amid anticipation that the company would report lower results. In after-hours trading, however, shares jumped as high as $121.

For all of 1999, IBM earned $7.71 billion, or $4.12 a share, up from a profit of $6.33 billion, or $3.29 a share in 1998. Revenues rose to $87.55 billion from $81.67 billion.

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-- Martin Thompson (mthom1927@aol.com), January 19, 2000