IBM Profit Up 10.4% in ‘88, Reflecting Industry Trend

IBM said Wednesday that its profit last year jumped 10.4% to $5.8 billion, the company’s best performance since 1985. Annual revenue, fueled by booming minicomputer and software sales, increased 8% to $59.7 billion.

Analysts said the showing amply demonstrates that IBM, the world’s leading computer maker, has resolved the worst of its problems. They added that the company’s massive work force cutback program, which has prompted more than 6,500 workers to accept generous severance and early retirement packages, is working.

In the final quarter of 1988, profit increased 12.4% to $2.3 billion, the sixth-straight quarter of improved performance for the company. Sales were $20 billion, up 9.3% from the year before.

With a few exceptions, earnings reports from a wide spectrum of high-technology companies show that 1988 was a good year for computer makers and many of their suppliers.

Tandem, a Silicon Valley mainframe computer maker, said Wednesday that profit for its first quarter ended Dec. 31 increased 32% to a record $31.3 million. Sales were $392 million, up 39%.

Tandy Corp., a Ft. Worth maker of personal computers and other electronics equipment, reported a narrow 3% gain in profit, to $135 million, for the second quarter ended Dec. 31. Sales in the period were $1.4 billion, up 8%. On Tuesday, Apple Computer Inc. announced a 16% earnings gain for its final quarter.

However, Wang Laboratories of Lowell, Mass., said Wednesday that its earnings for the second quarter ended Dec. 31 plummeted 97% to $1 million on revenue that was off 3% to $760.7 million.

Although IBM’s results were at the low end of several estimates by Wall Street analysts, most industry observers said they were pleased with the company’s overall performance and look for it to continue into the first half of 1989.

However, some analysts expressed concern that higher taxes and a stronger U.S. dollar could cut into those gains, and several analysts slightly reduced their 1989 earnings estimates for the company. IBM shares closed at $125, up $1.25, in consolidated trading on the New York Stock Exchange.

In its announcement, IBM said the 6,500 positions eliminated in the company’s manufacturing and headquarters retrenchment was about 2,500 more than originally expected. The workers will receive cash payments and other assistance, and IBM took a pretax charge of $270 million in the final quarter to cover the costs.

The charge was partly offset by a payment of $220 million from Fujitsu Ltd. of Japan as part of a settlement of a software copyright dispute.