Y2K Slows IBM In Fourth Quarter

IBM says Y2K isn't over. The computing and services giantsaid Wednesday that customer concerns about the millennium bug are to blame for a fourth quarter in which its profit fell 11% compared with the previous year. "Many of our large customers, who handle much of the world's critical data, had locked down their computer systems as they prepared for the Y2K transition," IBM chairman and CEO Louis Gerstner said in an earnings statement issued by the company late Wednesday afternoon.

IBM's net income for the quarter also dropped--to $2.1 billion from $2.3 billion in the same period a year ago. That translates to per-share earnings of $1.12, topping First Call estimates of $1.06 per share. IBM's fourth- quarter revenues came in at $24.2 billion, a 4% decline from a year ago.

During its earnings call, Gerstner also warned that the company expects Y2K-related slowdowns to impact its performance in the current period. "We are still feeling the lingering effects of Y2K in the first quarter," Gerstner said. Analysts say they are not surprised. "A lot of users were expecting to be dealing with Y2K problems right now," says Giga Information Group's Rob Enderle. "For the most part that didn't materialize, but the lag is there all the same."

Still, IBM's tepid year-end performance did not prevent it from posting a record net income of $7.7 billion for 1999 overall, compared with $6.3 billion the previous year. IBM's total revenues also increased in 1999--up 7% to $87.5 billion. The figure includes an after-tax benefit of $750 million, derived mostly from the sale of the company's Global Network to AT&T.