Ibm Assuring Its Employees No-Layoff Policy Still Holds / but, Other Aspects to Change

By Andrew Pollack, N. Y. T. N. S. | THE JOURNAL RECORD, August 27, 1986 | Go to article overview

Ibm Assuring Its Employees No-Layoff Policy Still Holds / but, Other Aspects to Change


Andrew Pollack, N. Y. T. N. S., THE JOURNAL RECORD


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 expectations.

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 mainframes.

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. …

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