IBM United Kingdom Holdings Ltd had a much worse 1989 than its siblings in France, West Germany or Italy, but the out-turn is baffling different from what seemed likely from the figures of the three other major European subsidiaries. Where since both France and Germany saw bustling internal business and flat exports, and Italy, making only AS/400s and small peripherals, saw a big increase in exports, it seemed to suggest that most of that increase had gone to feed growth in France and Germany: not so. It turns out that the 8% growth in the company’s business, to UKP4,192m, was all generated at home, with a soaring 21% increase to UKP2,110m, while exports – the PS/2 being the biggest item, as well as 9335 disks for the AS/400 and 9370 from Havant, and 3270s and controllers, actually fell 3% to UKP2,082m. Havant is also now making disks for the PS/2. What made it a poor year for IBM UK is that the profit margin fell to 11% from 13%, so that pre-tax profits were down 10.3% to UKP459m, and net profit fell 9.8% to UKP295m. The implication is that, as expected, IBM UK did not do at all well in its high-margin mainframes and big disks, but did dramatically well the lower margin AS/400s – and it must have sold at home a higher proportion of low margin personal computers than hitherto. On exports, the company says that unit shipments were substantially higher, and in part blames exchange rates and our position in the product cycle for the shortfall. As with the US parent, there was a big rise in IBM leasing of its own mainframes, which cuts profits up-front: IBM Financial Services increased the value of leases written during the year by 52% over 1988. Confirming the success of IBM’s cost-cutting measures – in particular persuading surplus staff to leave, although the company took on 640 people during the year, it ended 1989 with 18,552 people, down from the 18,686 with which it embarked on the 1989 year.
