You want to know what IBM Corp told the analysts at its conference, don’t you – well so do we, but under the Lou Gerstner regime, the thing is held sufficiently late that news from it is only just starting to filter out as we close: we do know that the shares turned tail and dipped into negative territory after chief financial officer Richard Thoman said that IBM would remain very focused on pricing competitively, especially in product areas such as mainframes, personal computers and the AS/400.
IBM Corp chief financial officer Richard Thoman also told the analysts that particular pricing pressures stretched from System/390 mainframes through AS/400s to personal computers and high-end storage products; according to Reuter, he also warned that he expects to see an even bigger negative impact on earnings in the second quarter from currency, as the dollar strengthens against the yen, and estimates the impact could be about $0.25 a share this quarter – and After that it becomes less important, he said.
During the first quarter, IBM Corp decided to reduce some of its personal computer inventories with computer dealers by taking down inventories by about $250m, Richard Thoman told the analysts, and overall revenue growth was higher before that move, which was made to compensate computer dealers for holding inventory; the Personal Computer Co growth was in the high single digits, despite a fall in the US – and, effectively admitting that he failed in his last job, which was running the Personal Computer Co, he confessed that IBM’s gross margins in personal computers are still not on the same level as Compaq Computer Corp’s and that margins went backwards in the quarter, mostly because Compaq sells more high-end servers, an area where IBM is cautious for fear of self-impact on the AS/400; Thoman also said IBM’s expenses in personal computers are coming down and expense levels are now below Compaq’s – but then Compaq is diversifying into networking now.
