Newspaper article THE JOURNAL RECORD

Mitchell Recalls Era of Acquisition-Hungry Banking

Newspaper article THE JOURNAL RECORD

Mitchell Recalls Era of Acquisition-Hungry Banking

Article excerpt

NEW YORK (AP) _ International Business Machines Corp. announced another huge downsizing Tuesday, saying it will eliminate 25,000 employees in 1993 _ possibly through its first-ever layoffs _ and consolidate manufacturing.

IBM's top executives, painting a dire portrait of the computer industry, also said they plan to slash research and development spending by $1 billion next year and shift IBM's emphasis from large mainframe computers to faster-growing software and computer services.

The latest job cuts are in addition to the 70,000 workers who left in the past two years. That would leave the nation's fourth-largest industrial corporation with 275,000 employees by the end of 1993 _ down from a peak of 406,000 in 1986.

To cover the costs of the downsizing, such as paying for severance plans, IBM said it would reduce its earnings this quarter by a stunning $6 billion. That charge against earnings comes on top of $5.4 billion in charges IBM already planned to take this year for earlier cost-reduction moves.

The charges ensure a huge loss for the company this year, on top of a loss of $2.83 billion in 1991.

IBM also warned it may no longer be able to afford its annual stockholder dividend at its current $4.84 a share, and that it probably would make no profit on its operations this quarter.

The news sent IBM's already-depressed stock price plummeting. It lost more than 10 percent of its value, falling $6.75 a share to $56.12 on the New York Stock Exchange, where it was the most-active stock. Almost 12 million shares were traded, nearly five times its average trading volume. The stock has been at a 10-year low for months.

IBM executives, speaking to reporters and analysts, described an industry that is changing so quickly the company has been unable to keep up. The rapid move by customers from highly profitable mainframes to cheaper, smaller, less profitable machines took the company by surprise, they said.

The executives also said the falloff in the economies of Europe and Asia in the past few months was far faster and steeper than they predicted. IBM derives about two-thirds of its revenue abroad.

"The decline in our business has been precipitous," said John F. Akers, IBM's chairman.

The downsizing, while largely expected, left some IBM watchers wondering whether the world's largest computer maker was finally on the path to financial recovery, or whether the cutback would be just another in a painful series that goes back six years.

IBM executives were reluctant to proclaim it the last big revamping. They said they expected unfavorable business and economic conditions would continue into 1993.

When asked whether he felt the company _ once a sure-fire investment _ has let its stockholders down, Akers said: "We have disappointed ourselves and we have disappointed other people. …

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