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September 4, 1988

COMPUTER ANALYST RAISES ANNUAL ESTIMATES OF EARNINGS PER IBM SHARE

By CBR Staff Writer

Salomon Brothers’ computer analyst Marc Schulman sees destinct signs of improvement at IBM and last week raised his annual estimates of earnings per share for the company to $9.90 from $9.75 for 1988 and to $11.40 from $11.30 for 1989, compared with $8.72 in 1987: Schulman said he expects IBM per-share earnings to grow 12% to 15% annually over the next few years, and that IBM’s profit margins have bottomed and will soon enter an expansion phase lasting several years; he is projecting turnover growth of 7% for 1988, compared with 5.8% in 1987, and 9% in 1989, and 8% in 1990, 1991, and 1992, and says that IBM’s cost control efforts are working to the extent that in the first two quarters of 1988, growth in turnover outstripped operating expense where in 1987 operating expense growth exceeded revenue growth by anywhere from 1.2% to 6.6%; he expects IBM shares to outperform the Standard & Poor’s 500 moderately for a long time, unlike 1982 and 1983 when the stock sharply outperformed the S&P 500 for a relatively brief period.

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