Static profits fails to dent IBM optimism

STIFF competition narrowing profit margins and a once off exceptional charge of £500.000 left pre-tax profits at IBM Ireland static at £8 million last year despite strong revenue growth.

Net profits were up 13 per cent to £6.4 million.

Its managing director, Mr William Burgess, said increasing competition in the information technology market meant prices and margins were both dropping. Achieving profit growth was "quite a challenge. To stand still you have to run pretty hard".

The "strong profit performance could be attributed to a combined focus on efficiencies and cost structures, associated with continuing strong revenue growth, he said.

The financial director, Mr Peter O'Neill, said the ratio of costs to Revenue had dropped from 25 per cent in 1988 to 15 per cent in 1996.

When the IBM sister company Lotus is included, IBM now employs 1,500 people in Ireland, will employ over 2,000 by the end of the year, and is on target to employ 5,000 by the end of the decade as its new campus development in Mulhuddart, Co Dublin, comes on stream.

The figures published yesterday were for IBM in the Republic. They did not include Lotus or IBM's treasury centre in the IFSC in Dublin.

Overall revenue for operations was up 15 per cent on 1995, to £79 million. The percentage of overall revenue accounted for by exports increased from 19 per cent to 23 per cent and is expected to increase further in coming years.

Mr Burgess said the company had difficulty with getting supply to meet demand for personal computers in the last three to four months of 1996.

The domestic services business had been the highlight of the year for him. It was heading towards a turnover of £20 million a year and the numbers employed in the area would increase from 200 to 350 or 400 in the next few years.

The technology campus in Mulhuddart, where IBM plans to eventually employ 2,850, was making "very rapid progress". The company was "about to erect steel" for the first factory and there may be 400 employed on the campus by the end of the year.

The "smoothness" with which the two operations already assigned to the campus were being set up was being watched closely by IBM worldwide, he said.

A storage systems division and micro electronics division are currently being established on the campus, with the latter due to be up and running before the end of the year. The storage systems division will be in operation by the second quarter of 1988.

The PC Help centre in Ballycoolin, Co Dublin, is in operation since October and now employs 400 call agents speaking 12 different languages, serving North America and Europe.

IBM's international treasury centre at the IFSC, which has a staff of 25 and assets under management in excess of £3.125 billion, has become the operations centre for all of IBM's European treasury services.