From: rsrodger@wam.umd.edu (Yamanari)
Subject: Death March at IBM?
Organization: University of Maryland, College Park
Date: Mon, 28 Dec 1992 18:13:17 GMT


Question:  Is IBM slowly sinking because they cannot adjust to
	the changing climate, or are they unwilling to adjust?

Monday, Dec. 28th 1992.  Current value of IBM stock?  ~$49 (from 
        more than 3 times that amount, no splits)

Long

---

        I would like to give IBM credit for being honest.  That is,
        the letter (dated Dec 18th) from IBM mailed out to stockholders
        is the first time IBM has acknowledged that they are in financial
        difficulty.  Well, not that anyone could have missed it, but
        it's nice to hear it from the horses mouth.

        I am going to excerpt some quotes for those who are not IBM
        stockholders so that they might hear what IBM has to say.

	[quotes reproduced w/o permission]

--

<cover letter on IBM stationery dated dec 18 1992--in entirety>

        Dear IBM Stockholder,

        I am taking the step of writing because, like you, I care very
        much about IBM.  And, like you, I am disappointed by our current
        financial performance.

        [If this sounds like IBM ad-copy, it should.  IBM tends to have
        a lot of "Like you"'s, "But,"'s and "Because"'s and "And,"'s 
	-- look for yourself at their OS/2 and RS6000 ads..]

        Because IBM has been in the news in recent days, I expect you have
        questions about the company's business performance and direction.
        I have enclosed a report that describes actions we announced on
        December 15, 1992, to improve IBM's competitiveness and future
	prosperity.  I hope that you find it informative.

	The Board of Directors and I want you to know that we are committed
	to improving the company's financial performance.

			Sincerely,

			John F. Akers [signed]

	JFA:mca
	Enclosure


---

	The report enclosed is a 3 page foldover printed on paper that, 
	while it is not transparent, would make good packing fluff for
	porceline.

	The content is almost schitzophrenic.  While the author seems
	to realize that a lot of IBM's troubles are caused by the company's
	reliance on sales of big, hulking machines and the software to
	run on them (and the deterioration of that market) it does not
	seem particularly different from stock reports / plans for the 
	future that IBM has put out in the last several years.

	I will excerpt from it, rather than posting the entire report.  

----

	John F. Ackers
	New York City
	December 15, 1992


	<para 5>

	Hardware volumes, revenues, prices and margins are under 
	pressure, with widespread discounting and price wars.  Combined
	with continuing improvements in technology and manufacturing 
	prodictivity, the result is excess physical and human capacity.

	[prepping for the lay off comments that come on page two]

	<para 7>

	Since October, the sharp decline of our European business has
	continued, with no immediate sign of improvement.  The Japanese
	economic environment is weakening, and results in IBM Japan
	are under pressure.  the outlook for North America operations
	has not improved.  The depth of these downturns was not
	anticipated.

	[You can say that again.]

	<para 8>

	We do continue to show good growth in our services, software*,
	and our financing businesses.  We are gaining a share in
	RISC-based workstarions, with our AS/400 and now in personal
	computers.

	[This might be said to be the only good news paragraph in the 
	whole report--it is also the only mention of what might 
	refer to OS/2.  I don't know if it's so comforting to have
	them putting so much faith in the AS/400, though--they've
	done that type of thing before.]

	But* this performance is not enough to offset pricing and
	profit pressures in our hardware business, and slowing demand
	for high-end systems and large capacity storage devices.
	    ^^^^ ^^^ ^^^^^^^

	[Though maybe they're starting to get the idea.]
	[Even if they do spend most of the rest of the 
	report hyping the AS/400]


	<para 9>

	As a result, our financial performance has deteriorated,
	and the outlook is unfavorable for the fourth quarter of 
	1992 and the early months of 1993.  Fourth quarter operating
	earnings are likely to be in the break even range, and the 
	first quarter of 1993 is an open question as long as this 
	volatile environment continues.

	[It's kind of depressing to see IBM -- IBM! -- voicing
	such comments even if the honesty is refreshing.]

	<para 10>

	While our cash flow remains strong, our current earnings
	expectations make us unsure of IBM's ability to 
	maintain the dividend at current levels.

	[The layoffs and dividend cutting, both predicted,
	are virtually assured.]

	<moving right along to page two--para 4>

	During 1993, we expect IBM's worldwide work force will be 
	reduced by approximatelty 25,000 additional people.  The general
	managers of our businesses will lead this work, which
	will occur business by business, location by location, skill 
	by skill.
	<para 7>

	To account for these work force and physical capacity changes,
	we will be taking an additional charge of approximately 
	$6 billion in the fourth quarter of 199.

	In addition, we are further reducing ongoing cost and expense,
	and redirecting our investment streams:

	* Capital spending, reduced by more than $1 billion in 1992
	will be reduced further in the next year;

	* Research and development expenses will be reduced by
	about $1 billion ofver the next 12 months or so;  [*sigh*]

	* Sales, general and administrative spending will also be
	reduced by more than $1 billion;

	* And*, we will be cutting other expenses across the board.

	We are also accelerating the shift in our investments to
	higher-value, higher-growth opportunities:

	*To services, including consulting, systems integration and
	operations management -- currently about $8 billion in 
	annual revenues, growing in excess of 35%;

	* Software, through continued internal investment and
	through investments in alliances and partnerships,
	over $11 billion in revenues;  ^^^^^^^^

	[I assume they're talking Taligent here, maybe OS/2--mostly
	mainframe SW still, though.]

	* Client/server and networked computing;

	* RISC technology and RISC-based workstations;

	* And*, to our continuing successful AS/400
	 midrange line

	...while we continue to protect customers' incestments
	in high-end systems.


	[That should be plenty--the rest is along the same lines.
	Discussion of ADSTAR and the IBM Personal Computer
 	Company--no more hard details]

-- 
	This weakness that you've told us of, it must be very comforting
	to have some make-believe specter on which to lay your blame.

	Blaming society for your problems is like blaming clouds for rain.
Xref: sparky comp.os.os2.advocacy:10948 comp.os.ms-windows.advocacy:3433