Tough spell for IBM not over

Press, 3 February 1987, Page 23

Tough spell for IBM not over

IBM has announced preliminary financial results for 1986.

World net earnings for the year ended December 31, were $U54.789 billion, down 26.9 per cent from 1985’s earnings of $6,555 billion. Earnings per share for the. year were $7.81 compared with $10.67 for 1985. The aftertax margin was 9.3% in 1986 compared with 13.1% in 1985.

World sales were $U551.250 billion, up 2.4% from $50,056 billion in 1985.

Currency rates had a positive effect on financial results for 1986. It is estimated that the lower value of the U.S. dollar compared with 1985 rates improved 1986 gross income $4,365 billion and improved net earnings by $645M.

Earnings before tax were $8.39 billion in 1986 and $11,619 billion in 1985.

The chairman, Mr John Akers, said in Armonk, New York, that 1986 was a difficult year for the company. Worldwide orders and shipments did not match the levels of 1985. Contributing to this decline were sluggish capital spending in North America, moderating economic performance in some countries, and “unsatisfactory” levels of demand for parts of the product line. Gross income from nonAmerican operations in 1986, included in consolidated results, was $25,888 billion, up 20.2% from $21,545 billion in 1985. Non-American net profit of $3,193 billion in 1986

showed an increase of 3.7% over 1985. For the quarter ended December 31, net earnings were $1390M, compared with $2681M for the corresponding period in 1985. Gross income for the fourth quarter was $16,945 billion, compared with $17,155 billion for the fourth quarter of 1985. Actions to streamline IBM in 1986 included:

• Reducing staff by about 5000 while maintaining IBM’s tradition of full employment. • Initiating an early retirement incentive that will help reduce American staff by more than 12,000 in 1987. • Cutting investments in plant and other property by more than 20%. • Reducing inventories more than 10%.

“In 1987, we will continue to sharpen our focus on customer needs, by dedicating more people to direct customer support and further enhancing our product line. We also will continue to reduce capital spending and cut costs and expenses throughout the company,” Mr Akers said.

IBM reported it sees no definitive sign of demand improvement in its worldwide business operations. The company also will not fully benefit until the second half of 1987 from some 1986 cost and expense actions and the shipment of some new products announced last year. As a result, IBM believes it will be difficult to match last year’s financial performance in the first quarter of 1987.