In a reversal, IBM says it will meet demand for its mainframe computers
Article Abstract:
An IBM internal memo states the company will be able to meet orders for its high-end mainframes, despite earlier claims of a backlog through 1st qtr 1996. IBM's mainframe orders are a business major indicator because the company earns half its profits from mainframes and related equipment and services. Analysts and experts are unsure of what caused the company to be so errant in its forecasting. Some claim that it shows that the US economy is slowing; that customers are turning to less expensive, new mainframe models; or they are buying from other companies. IBM also slightly increased production to handle increased demand. The majority of observers do not anticipate any effect on IBM's earnings and expect IBM to announce a 15% 2nd qtr revenue growth to $17 billion, but enough confusion has arisen that IBM will probably address the issue when it makes its earnings presentation. Analysts tend to take IBM's outdated mainframe ordering system as a possible explanation for the discrepancy between supply and backlog.
Publication Name: The Wall Street Journal Western Edition
Subject: Business, general
ISSN: 0193-2241
Year: 1995
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Dependence on big iron raises query on IBM: will hot streak last? Soaring stock, profits mask mainframe's fading role, weakness in other fields; a change for Mr. Gerstner
Article Abstract:
IBM's two-year financial reorganization and recovery is going successfully but analysts worry that the company's strategy is based too heavily on its mainframe computer product lines. The sudden upsurge in mainframe systems has happened as IBM has managed to cut $6.5 billion in annual expenses. The company's stock price is up more than 70% in a year with a high of $96.75, while profits rose to $1.29 billion on a revenue increase of 18%. The concern is that IBM will depend on growth in the mainframe industry rather than developing new technologies and will eventually become another old-line computer maker like Unisys. When IBM CEO Louis Gerstner first came to the company, he denounced the company's lack of a strategy for client/server architecture development but is now strongly supporting IBM's success in mainframe products.
Publication Name: The Wall Street Journal Western Edition
Subject: Business, general
ISSN: 0193-2241
Year: 1995
User Contributions:
Comment about this article or add new information about this topic:
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