IBM’s 3090 J and JH model announcements in late October have done little further to perturb the already unhappy UK leasing industry, according to Tony Goldsworthy of Econocom’s brokerage department. If anything, by prolonging the life of existing machines, they have given cause for cheeb in a depressed market. Goldsworthy stresses that the depression is European, if not worldwide, and that it’s largely due to the aggressive discounting policy of IBM over the past 12 months. He suggests that the UK’s high interest rates and the consequent shortage of cash should, in theory, lead to an increase in business, and he believes that the amount of business available is the same as it has always been. The main problem is that IBM is garnering it in an attempt to regain account control. However, he also suggests that the situation cannot continue indefinitely. While IBM may have made a deliberate decision to miss short-term targets in order to achieve market dominance, it can only buy business for so long. Not only does it have the most formidable overheads of any computer company, but the plug-compatible vendors are going to fight back at some point, which will lead to a never ending price decline spiral, detrimental to everyone involved. A not dissimilar view of the new 3090Js upgrades was expounded by Brian Challace of Meridian Computers. He regards the announcements as good news, since all upgrades add activity to the marketplace as well as prolonging the life of installed machines. However, he denies that there is any sort of downturn in the European market, and says that the out of 16 European operations, the UK is one of Meridian’s best performers. He also claims interest rates have a marginal effect on Meridian’s business, since it tends to have dealings with large blue-chip companies that are sufficiently resilient to cope with hiccups in the economy. As regards IBM’s attempts to achieve user-dominance, Challace suggests that the history of IBM is one of changing pricing tactics that have forced companies into a reactive mode, and there’s nothing particularly new under the IBM sun, including forceful efforts to regain account control. The future of Meridian has caused much speculation recently, and the last rumour to do the media rounds was a management buyout. Challace doesn’t discount the latter as a possibilty.
Sale of Meridian by year-end
However, the company is currently negotiating with third parties, and an announcement is expected by the end of December. A less enthusiastic view of the new machines came from Bob Wright of Comdisco. He says that the difference between the S and J models is minimal, unless a user has the latest ESA, a 3990 cache controller and lots of memory. That combination should provide a performance improvement of 14%, but otherwise look for something around 3%. His advice to 400E users is to ignore the J models, and swap to a 600E, since the cost of extra storage would negate any benefits the J might offer. Wright also argues that the upgrades do not extend the lifespan to any significant extent, and describes them as a very end-of-life kicker that won’t stay around at higher levels beyond 1990. On the subject of UK interest rates, Wright agrees with Econocom’s Tony Goldsworthy. When rates are high and cash is tight, purchase becomes less attractive, and the leasing market should receive a boost. As regards IBM and account control, he believes that a price war does bring some benefits to the user, but IBM cannot cut prices indefinitely since the policy is eventually incompatible with an acceptable level of profitability. – Janice McGinn
