IBM Says Lenovo Deal Hurt Q4 PC Sales, Blades Soar

IBM acknowledged that the pending sale of its PC business to Lenovo impacted fourth quarter sales, but a 150 percent growth in blade server sales more than offset the slowdown in PCs.

For its fourth quarter ended Dec. 31, IBM revenues reached $27.7 billion, a 7 percent increase over the $24.3 billion recorded a year earlier. Earnings totaled $3 billion, or $1.83 per share, up 12 percent from the comparable 2003 quarter profits of $2.7 billion, or $1.59 per share.

"Full year revenue for the Personal Systems Group grew 12 percent, however, after three quarters of strong growth, revenue growth slowed to 2 percent [in the fourth quarter], " Mark Loughridge, IBM senior vice president and CFO said during IBM's earnings call with analysts late Tuesday. "We experienced some disruption due to the Lenovo announcement which was made in the seasonally strongest month [December] of the year."

Overall hardware revenues for the quarter, however, were up 4 percent to $9.5 billion led by a 25 percent increase in xSeries revenues and a 15 percent increase in pSeries revenues. Loughridge said that IBM blade server sales were up 150 percent for the quarter and for the year.

IBM iSeries sales were down 9 percent during the period and storage revenues were down 11 percent, he said.

Software revenues totaled $4.5 billion, an increase of 7 percent over fourth quarter 2003. Middleware sales, including WebSphere, DB2, Rational, Tivoli and Lotus products represented $3.7 billion of the software revenue, up 8 percent from the year-earlier period.