Even President-elect Bill Clinton could not contain his dismay yesterday after IBM Corp announced that business in Europe was so bad that the company would at best break even in the current quarter – and prescribed only more of the same medicine that has so signally failed to save the situation up to now. Announcing […]
Even President-elect Bill Clinton could not contain his dismay yesterday after IBM Corp announced that business in Europe was so bad that the company would at best break even in the current quarter – and prescribed only more of the same medicine that has so signally failed to save the situation up to now. Announcing that the company would be taking a $6,000m charge with its fourth quarter figures to cover 25,000 more voluntary redundancies and plant closures, mainly in the mainframe and disk drive businesses, and a $1,000m cut in research and development spending and an unspecified bigger cut in capital investment, chairman John Akers warned that while cash flow remains strong, current earnings expectations make the company unsure of its ability to maintain the dividend at current levels. Our services and software businesses are showing excellent growth, added Akers. We are continuing to move aggressively into these areas while maintaining a sharp focus on our unique ability to create value for our customers by integrating the industry’s widest and most competitive choices of services, products and technologies. The actions we are announcing today demonstrate IBM’s continuing resolve to deal aggressively with the difficult transition that is occurring in the computer industry. The result will be a stronger and more prosperous IBM. The workforce reductions will come from manufacturing and development organisations and from marketing and servicing units. It also plans to increase the autonomy of its AdStar storage, Pennant Systems printer, and Personal Computer Co businesses. The workforce reductions will continue to be done through voluntary means, but If business conditions do not improve significantly, it is likely that some business units will be unable to maintain full employment in 1993. As well as $1,000m off development spending next year, sales, general and administrative expenses will decline by about $1,000m. Development expenditures and personnel will continue to be shifted to growth areas, including services, software, client-server computing, networking and multimedia. IBM has paid out $3.63 in dividends so far this year, and cutting out the fourth quarter payout altogether would save it a very welcome $680m or so. The shares plunged some $5 on the announcement, hitting $57.75 on volume of 4.3m shares in early trading. IBM expects the world economy in 1993 to be no better than this year, and the workforce reductions will come from manufacturing and development organisations and in marketing and services units, principally from support areas. President-elect Clinton, in the second day of his barnstorming session on the economy in Little Rock, Arkansas said of the IBM cut-backs That kind of investment is the exact thing we don’t want them to be cutting.