Breaking down its third quarter performance, IBM Corp said that while personal computer unit volumes increased year-over-year, dollar revenue was down, reflecting pricing pressures and product transitions – but that the rate of decline slowed compared with that of the second quarter, when analysts reckon that dollar volume in personal computers fell 20%. During the quarter, there was growth in sales of the air-cooled models of the ES/9000 mainframe – line – mainly 9121s, presumably, in the AS/400 and in RS/6000 workstations on a year-to-year basis. But there were declines on high-end mainframes, storage devices and low-end products on a year-to-year basis. The rate of decline of business in the US and Europe slowed from the second quarter of 1991 and the Asia/Pacific region showed modest year-on-year growth. Gross margins declined in the third quarter by 1.5 percentage points compared with the 51.2% gross margin of the second quarter.On personal computers, IBM said it was too early to determine whether it held market share in personal computers in the third quarter. It is still the company’s goal to hold worldwide market share on a unit basis for the year, but it conceded that in the first half, IBM was behind in achieving that goal, but said it was still within our grasp. IBM thinks the economy in the US might have bottomed, and IBM might see an improving economy in the fourth quarter and in 1992. Oppenheimer & Co analyst Marianne Wolk was one of the bulls, raising her investment rating to buy from market performer and added the stock to the firm’s recommended list. She told Dow Jones Professional Investor Report that she based her upgrade on the economic outlook and the fact that IBM reiterated its view of strong demand for the new high-end mainframes.She believes that IBM is sold out of the Summit machines until April next year, but she has not changed her forecast of $2.60 a share for the fourth quarter, where the fourth-quarter mean estimate on the Street is $3.07 – and she is also forecasting the first annual turnover decline since 1946 with her fourth quarter estimate of $22,600m against $23,000m in the last quarter of 1990, on which IBM did $4.30 a share. The company is currently running at a loss per share of $2.53 at the nine month mark after the accounting change, which on Ms Wolk’s forecast would mean only pennies a share for the full year – perilously close to a loss, making it certain that the dvidend will not be covered by net profits, which is the sort of contretemps that causes credit agencies to lower their ratings on a company’s debt, which could well mean that IBM will have to pay more to borrow in the next few months, at a time when it is likely to need to raise cash it launched a small issue this week (see alongside) – even though it bought in 500,000 of its shares during the most recent quarter. For 1992, Ms Wolk is going for $8.90 a share.
