IBM Net Rises 23.4% in 4th Quarter but Profit for Year Declines 0.4%

International Business Machines finished 1985 with a flourish, reporting a 23.4% rise in net income on Friday, but the world’s largest computer company also reported its first decline in full-year profits since 1979.

Although the earnings report nearly matched analysts’ forecasts, Wall Street took a dim view. IBM stock fell $5.125 a share to close at $150.875 on the New York Stock Exchange. It was the most heavily traded issue.

IBM, the dominant force in the computer industry, had predicted until late last year that its profits would increase in 1985. It fell just short, announcing a 0.4% decrease in net income to $6.56 billion.

“An uncertain North American economy, currency fluctuations, sluggish capital spending by our customers and an early 1985 pause in high-end processor (mainframe) installations had an adverse impact,” John F. Akers, IBM’s president and chief executive, said in a news release.

IBM said its net earnings were $2.68 billion in the last three months of 1985, up 23.4% from $2.17 billion in the same period of 1984. Earnings per share were $4.36, up 22.8% from $3.55 a year earlier. Fourth-quarter revenue rose 18.4% to $17.16 billion from $14.50 billion a year earlier.

For all of 1985, IBM said it had net earnings of $6.56 billion, down 0.4% from $6.58 billion in 1984. Earnings per share were $10.67, down 0.9% from $10.77 in 1984.

Revenue in 1985 rose 9% to $50.06 billion from $45.94 billion a year earlier.

Akers, who had been predicting higher earnings in 1985, said in December that the fourth quarter “may be strong enough to achieve earnings growth for the year, but that is not certain.”

The biggest factor in IBM’s fourth-quarter earnings improvement was sales of its popular 3090 series mainframe computer, nicknamed Sierra, which the company put into production early. IBM’s earnings had been hurt earlier in 1985 because companies put off buying mainframes until they had a chance to look at the Sierra.

IBM said foreign customers accounted for substantially all of its growth in shipments in 1985, reflecting continued weakness in the U.S. economy. Among the fourth-quarter winners, besides the Sierra, were storage devices for mainframes, typewriters, printers and personal computers, IBM said.

Wang Laboratories and Computer Sciences also reported earnings Friday.

Lowell, Mass.-based Wang, a producer of computers and office-automation equipment, said its second-quarter earnings fell 61% on an 11% increase in revenue in the last three months of 1985.

Wang said it earned $21.7 million in the second fiscal quarter ended Dec. 31, down from $56.3 million a year earlier. Earnings per share were 15 cents, compared to 40 cents a year earlier.

Revenue for the quarter was $679.5 million, up from $610 million a year earlier.

Computer Sciences of El Segundo reported that its third-quarter net earnings were off 60% from a year earlier.

Profits for the 13 weeks ended Dec. 27 were $5 million, or 35 cents per share. This compares to a year-ago net profit of $12.4 million, or 90 cents a share, including an $8.7-million non-recurring gain from the sale of a subsidiary.

Revenue for the quarter was up 15% to $204.9 million from $178.7 million a year ago.

“Setting aside the non-recurring gain of last year, pretax income for the quarter was up 59%,” said William R. Hoover, chairman and president of Computer Sciences.