IBM PC division loses $1bn

IBM owned up to a billion dollar loss for its PC division, as it posted its final results for 1998 yesterday.

The company - which was forced to reveal the loss under new accounting rules - blamed the results on a PC price war at the start of last year and the collapse of the Asian economies.

Andy Brown, research analyst at IDC, commented: "The size of the loss is amazing. Prices did drop very rapidly and IBM suffered because it had stuffed its channel in the last quarter of 1997."

The losses have fuelled widespread rumours that IBM will outsource its manufacturing or even pull out of the desktop market altogether. Brown said: "Both are possible, but I think their strength lies in the business market, so coupling hardware to services could be a way out." Brown added that PC prices are reaching a critical point, with only notebooks and palmtops offering decent margins for manufacturers.

Overall, IBM made $6bn profit for the year, on turnover of $81bn.

Meanwhile, IBM and storage competitor EMC have signed a $3bn deal under which IBM will provide it with disk drives. EMC will also have access to IBM patent information.