IBM achieves $46 million profit

By PETER GRIFFIN

IBM New Zealand has put its loss-making history behind it, making a profit of $46 million last year, with analysts predicting strong revenue growth this year.

The profit, according to accounts just released at the Companies Office, was boosted by tax benefits of $11.3 million. IBM had revenue of $355 million, up 8 per cent on 2002.

But analysts pointed out that the company's operating profit grew more than 30 per cent.

After several consecutive loss-making years in the 1990s and taking a financial hit from the failed Incis police computer project, IBM is probably the best financially positioned of the IT multinationals.

It has been profitable since 2001, by which stage it had accumulated losses of more than $100 million. Those tax losses are now reducing the company's yearly tax burden.

Dinesh Kumar, managing director of industry research company IDC, said IBM's revenue would come in at $400-420 million this year.

"They've one of the better balance sheets in the industry. They had good all-round business growth."

Kumar estimates IBM's "real" growth at 30 per cent, given the divestment of its ICMS billing software unit in late 2002, which he estimates added $60 million to annual revenue.

This year's revenue will be boosted with the acquisition of network systems integrator Logical CSI.

IBM paid $3.3 million for the local arm, according to its accounts. Kumar estimates Logical has annual revenue in New Zealand of $30 million to $40 million.

IBM New Zealand managing director Nick Lambert would not comment on the results before the New York-based company released its global results.

The New Zealand arm said the results "reflected strategic focus on growing market share in the small- and medium-enterprise sector".

IBM had won work from the likes of Vodafone and Air New Zealand, and its services business, worth $170 million last year, was growing.

"It's growing quicker than the average for the services market, which is 6 per cent," said Kumar.

But he predicted consolidation in the local industry, involving more mergers and acquisitions.

"They may be competing today, but they'll be forging some kind of partnerships in the future."

Kumar said IBM's IT consulting business contributed just $10 million. The company spent more than $17 million buying the consulting arm of PricewaterhouseCoopers.

IBM New Zealand grew faster than its Australian equivalent in 2003. IBM Australia turned a profit of A$180 million ($200 million) on revenue of A$3.6 billion for the year.