All the fizz that took IBM’s share price from a low of $115.75 in January to a very modest all-time-high of $175.875 on August 21 has gone flat and since then the price has jerked its way down to settle at around $150 – still $10 shy of where it was way back in December […]
All the fizz that took IBM’s share price from a low of $115.75 in January to a very modest all-time-high of $175.875 on August 21 has gone flat and since then the price has jerked its way down to settle at around $150 – still $10 shy of where it was way back in December 1985. The slide really got under way when the terms of the arbitration settlement with Fujitsu were announced: with the exception of the full-width front page splash on the story and its implications here in Computergram, press response was muted, but the market seemed to share our view that however much Fujitsu might have to pay for the settlement, the implicat-ions were severely negative for IBM. The reason is that there is no point in Fujitsu paying over vast sums of cash simply to sell software that competes with MVS in the Japanese market – it has to sell that software in the US and Europe to justify the expenditure, and it will only win business by com-peting with IBM on price as well as performance, hitting IBM hard in one of the most profitable sec-tors of its business. The mainframe end of the market is vitally important to IBM, but it is still only about 45% of its business, and the company is battling hard in the mid- range and at the personal computer end. In the latter, the news is decidedly mixed. The company has announced that unit sales of personal computers soared 40% in the first seven months of 1987, and that its third quarter, ended on Wednesday, was the best ever for personal computer sales. But what is the quality of those sales? The Personal System/2 only began to be available in May, which means that a large part of the first half sales will have been end-of-line XTs and ATs sold at knock-down prices. The cupboard is now al-most bare of all the old models, so those enormous sales are no guide to what is likely to happen in the next six months as the PS/2 has to shape up with cheaper, and in many cases faster, clones that seem to offer all the advantages currently available with the PS/2s. The Wall Street Journal talked to various research houses, whose individual figures are of little value since they each measure market share in a different way and come out with quite different answers, but they all agree that while IBM has been selling large numbers of person-al computers, competitors have been selling even more, so that its share of the market has declined. 11 cents a share from Intel What about the rest of the business? Reuters’ Law-rence Edelman has been asking around and elicited there are rumours that the third quarter was lou-sy from Gartner Securities’ Stephen Cohen. The rumours have not been strong enough to drive many analysts to downgrade forecasts of $2.00 to $2.10 a share for the period against $1.76 in the 1986 third quarter – but 11 cents will be from sale of its Intel shares. In the mid-range, pace that mon- ster order from Ultimate Corp, there is a conviction that the 9370 is not doing its job of winning new business – it is going well with large IBM mainframe users, but they would mostly have bought IBM anyway. And William Easterbrook of Kidder Peabody reckons IBM’s foreign business is flat this year in local currencies where the likes of DEC and Nixdorf Computer are showing gains of 15% or more. With its US arm in the doldrums, currency-boosted foreign business has been IBM’s mainstay of late.