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March 3, 1988


By CBR Staff Writer

IBM Europe looks for 10% growth in turnover this year after a flat 1987 and a disappointing 1986, chairman of the Europe/Middle East/Africa group Michael Armstrong told Reuters’ Charles Fleming in an interview this week. The performance in the past couple of years means that IBM has failed to keep pace with its – smaller – European competitors, but Armstrong is optimistic that the two-year restructuring that has seen thousands of employees turfed out of their cosy offices and sent back onto the cold hard road will bear fruit in much better performance across Europe this year. We expect to grow with the industry in 1988, he said. We’re aiming at 8% to 10%. As for the restructuring, the problems we faced were common across Europe, he said. Much of the business in the market place was going uncontested by IBM. We needed to significantly improve the coverage of the market and the focus on our customers. As a result, the IBM Europe sales force is 35% larger than it was two years ago – but the administrative and manufacturing headcount is substantially down, in part from early retirement programmes in several countries, but more from redeployment of personnel into sales. The 35% increase translates to 6,000 new jobs in marketing across Europe between the end of 1986 and the middle of this year. But IBM also realised that our customers wanted more than a competitive hardware offering, They wanted a competitive solution and se we have reoriented a lot of our resources to providing a solution, said Armstrong. This is reflected in the move towards bidding for systems integration contracts – the Amadeus airline reservation system being an example. In France, the company has also formed a joint venture with Sesa SA to bid on systems integration contracts, the new emphasis transferring to Europe the new role assigned to the Federal Systems Division in the US. These days, Federal Systems by no means deals only with the US Federal government, but has been turned into a direct competitor to companies like General Motors’ Electronic Data Systems, and Computer Sciences Corp. And Europe is where the cream of IBM’s profit comes from these days: in 1987, Europe contributed 42% of IBM’s net profit of $5,260m, on local turnover of $20,310m, 37% of the group total. The four major European markets of West Germany, France, UK and Italy together make up 60% of the total European business, but of the four, only the UK performed satisfactorily, according to Armstrong. Britain is a competitive breadbasket. If we don’t win business in the UK, it’s because we’re not as good as we should be, he concluded.

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