It has long been clear that IBM Corp’s latest restructuring into 13 somewhat autonomous business units has taken too long and has not gone far enough, and the company has called an extraordinary board meeting for next Tuesday to decide what cuts need to be made to meet 1993 targets. According to the Wall Street […]
It has long been clear that IBM Corp’s latest restructuring into 13 somewhat autonomous business units has taken too long and has not gone far enough, and the company has called an extraordinary board meeting for next Tuesday to decide what cuts need to be made to meet 1993 targets. According to the Wall Street Journal, the IBM board does not normally meet in December. The mainframe business and the chip business are expected to be the focus of the cuts, with further plant closures and property disposals thought likely. It is also expected that IBM may want to shed up to a further 30,000 people from its 300,000-strong payroll, with undisguised lay-offs clearly on the agenda. The jobs that do seem to be safe are those of top management: an official familiar with the agenda for next week’s board meeting said that it doesn’t include any discussion of personnel changes involving John Akers or any other executive. The biggest worry on Wall Street, where priorities tend to be narrowly focussed, is over the dividend: if the company has to take another $1,000m to $2,000m of charges this quarter to cover further closures, it is unlikely to be able to meet the dividend out of cash flow. We expect sweeping changes at IBM to be announced shortly and we believe that if possible, IBM will introduce changes in equity ownership, Merrill Lynch & Co analyst Dan Mandresh told investment clients in a report. He postulates that IBM could create different classes of shares whose dividends would reflect performance of relatively healthy businesses such as the AS/400 and RS/6000, and possibly AdStar storage products, but many observers now believe that nothing less than a full break-up of the company would enable the better bits to prosper and restore shareholder value. The halfway house of floating a part of the equity of the better businesses while retaining a majority is ruled out by the fact that the units so treated have to have a three-year separate trading record first. The biggest shock in the new round of cuts is that IBM’s forecasting last year was so abysmal that despite the fact that 40,000 people will have left by the end of the year where it was only counting on shedding 20,000, it still has to make more cuts. The speculation drove IBM shares down $1.50 to $63.75 in heavy trading by mid-morning. Hoping to divert attention from its corporate woes, IBM yesterday added seven new desktop models to its PS/1 line in the US, adding 25MHz 80486SX models to the Essential, Expert and Consultant lines. They come pre-loaded with MS-DOS 5.0 and Windows 3.1, and street prices are expected to range from $1,700 to to $2,100.
