``In a nutshell, the demand is coming from the old technology - mainframes - and there is weakness where there is supposed to be growth," Stephen Smith of PaineWebber said.
The company said demand for mainframe computers and storage products far outstripped supply, helping revenues to rise 6.6 per cent to $19.9bn.
For the year, IBM's revenues were up 2.1 per cent to $64.05bn. Excluding the sale of its Federal Systems, IBM's 1994 revenues were up 6 per cent.
The figures mark the first real growth in revenues since 1990, when heavy cost-cutting began. Louis Gerstner, chairman and chief executive, said: "We enter 1995 with the bulk of our right-sizing behind us. Despite the progress we have made, however, we are not satisfied with our revenue growth. The face of change at IBM must continue as we increasingly focus on growth and on the implementation of our long-term strategies."
Revenues rose in most areas except Latin America, which saw a $1.1bn fall. Revenues in Europe rose 8 per cent to $7.6bn, Asia-Pacific was up 11 per cent to $3.4 bn, and the US was up 5 per cent to $7bn.
hardware sales were up 3 per cent to $10.6bn and software revenues were up 7 per cent to $3.3bn. However, sales of personal computers declined. Jerry York, chief financial officer, declined to give details about the decline in PC revenues. He said: "I can assure you that there is an excruciatingly high sense of urgency there. This is one-sixth of our business and it's underperforming materially."