Shellshocked analysts that failed to recognise that IBM was in trouble until the company jogged their arms, have recovered their composure and recast their figures in light of what they now know, ahead of the third quarter figures, which IBM is expected to announce today. The forecasts for earnings per share for the quarter range […]
Shellshocked analysts that failed to recognise that IBM was in trouble until the company jogged their arms, have recovered their composure and recast their figures in light of what they now know, ahead of the third quarter figures, which IBM is expected to announce today. The forecasts for earnings per share for the quarter range from $1.40 to $1.80, but perhaps more striking is that many analysts reckon that the fourth quarter also will be so dismal that IBM, which was growing at up to 20% a year in the early 1980s, may now be right down in the doldrums with the likes of Unisys Corp and register negligible turnover growth this year – a round $60,000m is the forecast against $59,680m last year. Reason for this is that IBM’s aggressive pricing strategy has forced margins down. Analysts have at last woken up to the fact that, as we haev been stressing for months, IBM, far from buying itself better performance in the future by grabbing every leasing contract going, regardless of how much it has to discount, is simply laying up trouble for the future. Joseph Payne at Alex Brown & Sons is now highlighting that shorter product cycles have made computers obsolete after three years and therefore difficult to re-lease or sell when IBM takes them back off lease. Standard & Poor’s analyst Robert Natale also now says that IBM’s most serious earnings problem is that leasing is growing relative to buying, and predicts that the problem will persist at least until IBM introduces a new mainframe family, which he ex pects in 1991. And Dean Witter Reynolds analyst Jay Stevens expects Summit in February 1991, and notes that customers could decide to lease it instead of buy it, so that revenue could be weak even if ship ment levels are high – unless IBM simply closes down IBM Credit Corp and lets the third party leasers take the strain – every machine put through a third party leasing company is a sale on IBM’s books. Natale now reckons that fourth-quarter earnings will be hurt by a lack of product introductions, the dollar continu ing strong against foreign currencies, and a general softening in demand for capital goods. But he opti mistically looks for earnings per share to climb in 1990 to $10.20, helped by the introduction of the new RISC workstations – are they going to be big money- spinners? – and by the new high-end disk drives but if what Electronic News has picked up about the drives is correct (CI No 1,282) they could start shipping a lot later than most commentators expect.