There are worries on this side of the Atlantic that the recovery confidently forecast for Italy’s flagship, Ing C Olivetti SpA, may have run out of steam. Olivetti’s profits plunged 29% last year as the company suffered the hangover from AT&T Co’s over enthusiastic buying of personal computers in 1986, but sales to the US phone company had been forecast to reach 150,000 machines this year, down from 210,000 in 1986 but a big improvement on the 40,000 for 1987. But now the 1988 target has been scaled back to 120,000, and the Wall Street Journal finds that analysts are lowering their estimates, suggesting that while sales may have grown 15% in the first half, figures for which are due this week, profit margins don’t look like being any better than last year, when the company reported full year net profit down 29% at $290m on sales flat at $5,300m – and there may be a higher tax charge this year. Unless there is a first half profits rise, the company is not likely to be able to meet its target of a 20% to 30% gain for the full year. To deflect attention from the numbers, Olivetti is expected to announce a reorganisation, perhaps involving an early retirement programme and a possible splitting of the company into separate businesses for computers and for office automation, the idea being that each could go in separate directions to find international partners. And why have things gone so quiet on the issue of whether AT&T Co will keep its 21% stake in Olivetti or seek to sell it? The phone company is not going to rock the boat while it’s still in with a chance of being chosen as the international partner of Italtel SpA. It isn’t likely to cause many sleepless nights, but Italian papers allege that an Italian prosecutor has asked for Olivetti chief Carlo de Benedetti to be charged with extortion in connection with the notorious 1982 collapse of Banco Ambrosiano. The decision on whether to proceed to indictment is in the hands of a team of investigating magistrates.
