About the only real surprise in IBM Corp’s awful warning that per share earnings for the current quarter are likely to be around 90 cents a share where Wall Street was banking on $1.80 or so is that it was greeted with such surprise. It was acknowledged that the US, the UK, Australia were in recession and that France was going off the boil – and that only Germany of the major European markets was bucking the trend and that primarily because of unification. Japan’s chipmakers had already warned that their projections had been too high and said they were cutting back. Markets had been gripped by euphoria over the successful evolution of and quick end to the Gulf War and were assumed to be looking beyond the recession to recovery. But in the real world, the recession is far from over and has to be undergone. In 1990, IBM felt that it had a lot to prove and the company has scores of wrinkles to create a booming fourth quarter figure and thus an apparently triumphant year – and with more to prove, the company clearly used more of them even than usual last year. But every time it over-indulges in the fourth quarter, there is an inevitable hangover in the first quarter of the following year, and the throbbing is that much worse this time around because of the economic factors beyond its control. There had already been one warning from Amdahl Corp that conditions were diffi cult, a warning that the IBM watchers appear to have shrugged off as of no concern to IBM. On Tuesday, Amdahl responded to inquiries prompted by IBM’s ann ouncement by repeating that it is also seeing an economic slowdown and had experienced a decline in business in most European countries throughout the first quarter. We expect that earnings will be impacted this quarter, and that they will be well below last year’s first-quarter level and analysts’ expectations, it said. The on to $150 euphoria surrounding IBM’s share price a month ago had already boiled over before the announcement, and the shares had settled down to a trading range in the high 120s, but Tuesday saw a $13 slump to $115.125, significant ly taking them back down through their previous re sistance point of around $120 – and some analysts, forecasting a down year, see them going back below $100. As for markets as a whole, it is too early to make firm judgements, but Tuesday’s plunge and Lon don’s weakness in the wake of the Budget suggest that the Gulf War surge was not the start of a new bull market but a sucker’s rally in a long bear market.
