It has been difficult to understand why US analysts were so enthusiastic about IBM’s prospects for 1989 – by Thursday night (IBM’s shares) were down at $118 and it is difficult to see any near-term upside, we wrote on Monday March 13 (CI No 1,134) and IBM itself has now had to join the bears. With Wall Street plunging from the off on Friday, announcements on the wires started to get backed up as they were supplanted by running stories straight from the trading floor, and it wasn’t until mid afternoon New York time, a couple of hours after we closed for press, that IBM’s warning came to the head of the queue – and the shares, already off $2.125 at $116 by lunch-time (CI No 1,139), plunged another $3.625 to bottom at $112.375 to make a $5.75 fall on the day. The company says that it expects first quarter profits to be below the range of securities’ analysts estimates, mainly because of delivery delays of some 3090Ss during the period – and that it appears that anticipated first quarter results will make it more difficult for the company to achieve the higher end of the range of analysts’ earnings estimates for the full year. Earnings estimates of 20 analysts for IBM for this year’s first quarter range from a low of $1.68 a share to a high of $2.16 with a mean of $1.78, and IBM seems to be implying that the figures will be below the worst forecast, and that means a down quarter: a year ago, the company reported net per share of $1.53 a share. Estimates of 42 analysts for IBM for the full year range from a low of $10.50 a share to a high of $11.80 with a mean of $10.98; from what IBM is saying now, it does look as if it still expects an up year, because it did $9.80 a share in 1988, $9.27 before the accounting change. The company may well find itself in trouble with some of its more impatient and easily offended shareholders, because in its statement on the chip problems that delayed some 3090Ss, it gave the impression that although it might affect the first quarter figures a lit tle, the impact would be minimal (CI No 1,132). The worry for followers of the company is that there are several other threats to its business this year, not ably that of a turndown in Europe, which pulled many of its chestnuts out of the fire last year – while there is no sign of a dull US market getting any bet ter. There is also a buying pause in big disk drives as users wait to see what IBM has up its sleeve for late this month or early next, as well as the 5.25 cluster subsystems that are expected later this year.
