SAN FRANCISCO - On bulletin boards and in memos
throughout the vast empire that is the International Business
Machines Corp., the word has gone out. Management wishes to reassure
employees that they will not, repeat not, be laid off.
At a company in which a no-layoff policy has been as much a part
of corporate culture as the blue suit and white shirt, such
assurances would hardly seem necessary. But these are times of
unusual duress for IBM. Even if the no-layoff policy survives, other
aspects of the company's business seem about to change.
IBM, accustomed to nearly uninterrupted growth in profits, is
likely to see its 1986 earnings drop for the second year in a row,
the first time this has happened in a half century. Recently
announced results for the second quarter show net income dropping 8
percent and profit margins are near their lowest level in years.
IBM's stock has taken a tumble from its high this year of about $162
to about $130.
An IBM that seemed all but invincible only a year and a half ago
now has weak spots in its product line that have begun popping out
like springs from an old couch. Sales of its new line of giant
mainframe computers, which came out late in 1985, seemed to stall
earlier this year, although IBM says sales are firm now and meeting
Its mid-sized computers, a series of machines that cannot talk to
one another, are befuddling users and falling prey to a newly
revitalized Digital Equipment Corp. IBM's overwhelming dominance of
the personal computer market is being sharply eroded by clones -
less-complex, often non-brand-name machines produced at low cost in
the Far East. And the new PC-RT, intended to spearhead IBM's entry
into the fast-growing market for desktop engineering workstations, is
widely viewed as anemic.
IBM's chief executive, John F. Akers, has attributed the company's
woes largely to the weak economy and lackluster capital spending.
Concerns that the investment tax credit will be removed by tax
overhaul legislation have slowed purchases of multi-million-dollar
While analysts and outsiders say these factors are undoubtedly
among the reasons for IBM's woes, they are not the only ones.
Rather, they say, IBM's situation results from a number of tactical
errors by management and changes in the fundamental economics of the
computer industry that have hit IBM all at once.
And, many analysts say, the fundamentals indicate that IBM might
never return to the high profits and easy times of yesterday.
""They're frantically pushing all the buttons they pushed in the
past, but this time, they're not working,'' said Brian Jeffery,
research director at the International Technology Group, a consulting
firm in Los Altos, Calif.
""I think we're entering a period where we are going to see an
erosion of the huge gross margins we've seen from IBM in the past,''
said Francis R. …