IBM reported $3 billion fourth-quarter financial results yesterday, with CEO Sam Palmisano describing these as IBM's best ever.

IBM's hardware, software and services groups all grew during the quarter compared to the same period of last year, pushing the company toward a 7 per cent revenue increase, to $27.7 billion. Earnings for the quarter were $3.04 billion, up 12 per cent. IBM's per-share earnings from continuing operations were $1.81, ahead of the $1.76 consensus forecast of analysts polled by Thomson First Call.

IBM also reported its annual results. Revenue for the year was $96.5 billion, up 8 per cent, and earnings were $8.4 billion, up 11 per cent.
Global services remained IBM's biggest business, bringing in $12.6 billion in the quarter ended December 31, up 10 per cent from the previous year's fourth-quarter total. Analysts had been watching for signs of slowing services growth as IBM faced the loss of several high-profile customers, such as JP Morgan, which cancelled a $5 billion deal in September, following its merger with Bank One. IBM's services backlog of business contracted for but not yet billed remained essentially unchanged from last quarter, at $111 billion.

IBM's backlog stood at $120 billion a year ago, but chief financial officer Mark Loughridge said IBM is unconcerned about the decline because its services group remains on track to meet growth expectations. In a conference call with analysts following IBM's results release, he attributed half the backlog decline to the lost JP Morgan contract. Shorter contract durations are also having an effect, he said.

IBM's hardware business brought in $9.5 billion, a 4 increase, while the software group grew its revenue 7 per cent, to $4.6 billion.

The struggling PC business IBM agreed last month to sell to China's Lenovo Group showed some growth, increasing revenue 2 per cent, to $3.5 billion.

"PC revenue, while up, was impacted by the pending sale of our business to Lenovo," Loughridge said. "We experienced some disruption."

Overall, IBM saw the economy turn "from recovery to modest expansion" last quarter, according to Loughridge. The vendor forecasts 4 to 6 per cent growth in IT spending next year.