IBM: IT industry ready for next growth cycle

IBM's strong fourth-quarter earnings and revenue prompted the vendor to declare that the IT recession is over and that the industry is poised for a new growth cycle.

'It was naive to talk about growth when customers weren't spending,' said John Joyce, IBM's senior vice president and CFO in a conference call with analysts this week, following the company's 2003 year-end earnings report. 'The industry stabilised in 2003. In 2004, the IT industry is beginning its next growth cycle.'

For its fiscal 2003 fourth quarter ended 31 December, IBM reported revenue of US$25.9 billion, up 9 percent from the US$23.7 billion recorded a year earlier. Income for the period was US$2.7 billion, or US$1.59 per share, compared with US$1 billion, or 59 US cents per share, for fourth quarter 2002.

Fiscal 2003 revenue reached US$89.1 billion, up 10 percent from the US$81.2 billion reported a year earlier. Earnings for the year totaled US$7.6 billion, or US$4.40 per share, compared with US$3.6 billion, or US$2.10 per share, a year earlier.

Because of the turnaround predicted for 2004, IBM is on track to maintain its goal of high single-digit growth in revenue and low double-digit growth in profits, Joyce said.

Strong growth in IBM's hardware revenues was the harbinger signalling new growth in the IT industry, he said. 'An 18 percent growth in hardware shows that customers are preparing for an uptick in their businesses,' he said. 'They are moving work from a dialog to a transaction.'

Overall hardware revenue was up 12 percent in the fourth quarter, compared with the 2002 period, with Systems Group revenue leading the charge, up 18 percent year over year.

IBM's Personal Systems Group revenue jumped 16 percent over 2002 to US$3.5 billion. The group had a profit of US$9 million for the period. IBM ThinkPad revenue grew 35 percent from the year-earlier period while desktop revenue declined 6 percent, Joyce said.

IBM's software revenue for the period were US$4.3 billion, an increase of 12 percent from the fourth quarter of 2002.