Profits of Fortune 500 Dropped
Profits generated by Fortune 500 companies declined for the first time in seven years in 1998 as U.S. companies suffered the effects of the economic crisis in Asia, Russia and Latin America.
Overall, profits for the 500 fell 1.8% last year, compared with earnings growth of 7.8% in 1997, according to Fortune magazine’s annual listing of the largest U.S. public companies, released today.
Revenue growth shrank to 4%, from 8.7% in 1997, as U.S. companies found demand for their products and services stifled by the ongoing financial pain overseas.
While 1998 will not be remembered for its stellar profits, the magazine said, it is likely to mark the beginning of the end of the dominance of blue chips such as General Motors and Coca-Cola. Younger companies such as Microsoft, Cisco Systems and Dell Computer, with their surging revenue, are wielding more influence in corporate America, Fortune said.
Fortune said 1998 “will probably be considered a watershed year, the year when the New Economy fundamentally parted ways with the old and high-tech consolidated its role as the driving force behind the growth of big business.”
GM remained No. 1 for the 11th straight year on the list, which ranks companies according to revenue. It was followed by Ford Motor, Wal-Mart, Exxon and General Electric.
Cisco, meanwhile, jumped 61 slots from No. 253 to 192, while Dell shot up from No. 125 to 78.
Other high-tech companies that have become darlings of Wall Street recently, haven’t made the list yet. While the stock prices of online auctioneer EBay, Internet service provider @Home and online bookseller Amazon.com have given them market capitalizations surpassing many Fortune 500 firms, they have yet to generate significant revenue, let alone profits. The company that ranked No. 500, container maker Ball Corp., had nearly $2.9 billion in revenue.
Among the Internet group, America Online came closest to making the list, coming in at No. 535.
GM had $161.3 billion in revenue, followed by Ford with $144.4 billion, Wal-Mart with $139.2 billion, Exxon with $101.7 billion and General Electric with $100.5 billion.
IBM was sixth with $81.7 billion, followed by Citigroup with $76.4 billion, Philip Morris with $57.8 billion, Boeing with $56.1 billion and AT&T; with $53.6 billion.
