As they gird to announce what will in the main be rotten second quarter figures, computer companies around the world face a third quarter that promises to be at least as bad, an outlook that makes it likely that we are at the beginning rather than the end of a stream of alliances and takeovers like the IBM Corp deals with Wang Laboratories Inc and Apple Computer Inc, and the proposed acquisition by ICL Plc of Nokia Data Systems. Even giants like Siemens-Nixdorf Informationssysteme AG face problems that could soon prove terminal – the ultra conservatism of German users, particularly in the public sector where they are spending other peoples’ money, means that the inevitable attrition of Siemens’ BS2000 mainframe base has been slower coming than for its US siblings and Bull SA, but the inevitability that the business will swing from a cash cow to a millstone around the company’s neck, puts a giant question mark over the company’s future in its present form – how long before Siemens does a Wang-like deal with IBM for mainframes – or will it choose its long-standing partner Fujitsu Ltd instead? Siemens’ problems are further compounded by the disarray in the Nixdorf customer base and uncertainty about which product lines will hold sway after the merger. That the mainframe business is desperately weak is not in doubt: Donald Young of Shearson Lehman Brothers points reminds people that IBM’s mainframe sales are down by over 30% on last year, and Computer Intelligence finds that the one white hope to save the year, the Summit models, is turning out to be a white elephant – it says that demand for the top-end boxes is particularly weak.

Storm cones high

Overall, IBM’s sales of hardware in the second quarter are forecast to be down a scary 20%, leading observers to believe that the company will this year report its first decline in turnover since 1946. Digital Equipment Corp is expected to report a big loss after charges for lay-offs for its fiscal year to the end of last month. The fact that times are so bad for companies that have strong balance sheets hoists the storm cones high over the computer companies that are weighed down with debt, the most prominent being Unisys Corp, Prime Computer Inc, Memorex Telex International NV and Concurrent Computer Corp. In Europe, Bull is now a corporate basket-case, and ICL, which has ridden the recessionary waves remarkably well, is not confident of much growth this year. A handful of companies stand out from the gloom – the ones that have either managed the transition to open systems most effectively – and that meant seeing which way the wind was blowing way back in the early 1980s, as NCR Corp and Hewlett-Packard Co did, and the one out-and-out winner among the companies born in the open systems age, Sun Microsystems Inc. The problems for the latecomers to the party, not excluding IBM, is that the old orthodoxy has been turned on its head, and buying Unix systems from Sun is seen as the safe choice where opting for machines like the RS/6000 is seen as risky. The Japanese companies are largely insulated from the recessionary hurricane by the uniquely cosy relationship they enjoy with their customers back home, and by the fact that they for the most part conglomerates – but Fujitsu Ltd, not diversified, begins to look seriously exposed to recession in foreign markets.