Opinion ID: 373838
Heading Depth: 4
Heading Rank: 3

Heading: Increases in CPU prices

Text: 79 In July, 1971, IBM announced price increases on certain of its CPUs of up to 8%. The weighted average price increase of all CPUs was 1.5%. CalComp argued that these price increases, instituted two months after FTP was announced, were designed to offset the short-term revenue losses expected from FTP price cuts. After FTP users were locked into IBM peripherals for one or two year lease terms, according to CalComp, they would be unable to change CPUs, thus enabling IBM to raise CPU prices without appreciably affecting demand or profitability. 80 However, CalComp's own evidence indicated that the net effect of FTP and the CPU price increases was not expected to be a wash with respect to either CPU demand or overall profitability. CalComp introduced an IBM memo written after the CPU price increases went into effect stating that the net effects of the Fixed Term Plan and (CPU) price change will probably be a wash insofar as Business volumes are concerned. (Emphasis added). The author of this memo went on to explain that FTP would have the effect of increasing peripheral volume, while the CPU price increases would probably induce adverse reaction on the part of some customers . . . . In terms of overall business volume, the author concluded, (a)ny decrease in system acceptances which occurs will probably be offset by . . . the Fixed Term Plan. In other words, there was not a single demand function for CPUs and peripherals; IBM did not expect to raise CPU prices with impunity, as CalComp asserts, by virtue of the effects of FTP. 81 Moreover, there was no evidence that CPU price increases actually offset the FTP price cuts. According to CalComp's amended complaint, (p)eripheral devices . . . account for between 50% And 75% Of the total value of a system configuration. The trial testimony of Richard Whitcomb, Director of Product Planning at Itel and a former IBM employee, and Edwin McCollister, Director of Market Development at Burroughs, confirmed this. Since, as discussed Supra, the FTP price cuts amounted to 8% And 16%, a jury would be hard pressed to conclude from CalComp's evidence that the CPU price increases in fact offset FTP losses i. e., that a weighted average price increase of 1.5% On CPUs made up for price cuts of 8% And 16% On peripheral products of equal or greater value. 82 Other evidence portrayed IBM's decision to raise CPU prices as motivated by inflation and cost concerns. IBM had not raised its mainframe prices in over four years; its 1971 increases were approved as cost-justified by the newly-formed Price Commission under the Economic Stabilization Program then in effect. 83 Viewed in the light most favorable to CalComp, this evidence does not provide support for its offset theory. Especially since we have already determined that the FTP price cuts allegedly facilitated by the CPU price increases were themselves profitable and reasonable even for a monopolist in any event, 32 it was proper to take the case from the jury on this issue.