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IBM shows higher 2005 profit, but flat sales

IBM shows higher 2005 profit, but flat sales

IBM ended 2005 with strong earnings, but essentially flat sales, as it reported net income for the year of US$8 billion on revenue of $91.1 billion.

The company exited PC manufacturing in early 2005, selling its operations to China's Lenovo Group. The change reverberated through IBM's financial results throughout the year, as it reported declining revenue compared to periods in the prior year, which included the PC business. Excluding PC revenue, IBM's 2005 revenue rose 3%.

IBM's revenue in the fourth quarter, ended Decemebr 31, was $24.4 billion, around $1 billion shy of analyst estimates. That total represents a 1% decline from 2004's fourth-quarter revenue, excluding PC revenue.

Income for the quarter was $3.2 billion, up 13% from 2004's fourth-quarter income.

IBM is compensating for a tough spending environment by tightening its operations, casting off underperforming businesses like its PC unit and targeting high-margin opportunities. Its vaunted Global Services business posted a 5% sales decline in the fourth quarter and eked out 3% growth for the year, reporting total revenue of $47.4 billion, but increased its profitability by boosting its gross margins.

Gross profit margin improvement in the quarter of more than five points shows the benefits of the company's focus on more profitable, "high-value segments" of IT, coupled with emphasis on productivity and integration, IBM chief executive officer Sam Palmisano said in a prepared statement. The company's business model is "much more balanced and profitable than it was just a few years ago," he says.


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