IBM is in no hurry to reveal details of its plan to spin off its keyboards, low-end printers, typewriters and office supplies business to Clayton & Dubilier, but a few more details are beginning to emerge – one being that Hewlett-Packard Co faces tougher competition in the mass market laser printer business because IBM’s sexy new low-end laser printers are included. The new company is expected to move quickly to seek OEM agreements for keyboards and printers, with DEC and Xerox Corp said to be at the front of the queue. And although the manufacturing and administrative workforce is to be trimmed, Martin Dubilier, chairman of the buyout firm, told the Wall Street Journal that the new company would be hiring 200 to 250 sales people in the US and another 200 in Europe, to sell the product lines to independent computer retailers, redressing the neglect of IBM’s general sales force, which preferred to sell more profitable items. Estimates are that the buy-out will be financed with only $500m of equity, with IBM retaining 15% to 20%, and management getting 15%. Bank debt would account for the balance, leaving the company with a pretty uncomfortable 3.5 to one debt-to-equity ratio – uncomfortable because while it is a cash-generative business with mature products that do not need vast investments in research and development to keep up, it will be launched into what looks increasingly like a substantial recession. The ultimate aim would be to take the firm public.
