IBM held its annual meeting in Pittsburgh yesterday – and while some may have thought the choice of venue appropriate – John Akers was in characteristically ebullient flow, opening by saying that 1988, as was 1987, was a year of steady progress for IBM. We increased our pace of growth with revenue up 85, he went on. We improved our gross and net margins on sales; we had a net earnings increase of 10% and an earnings-per-share increase of 12%, and we improved our return on investment. IBM again was the most profitable company in the world and continues to lead all American companies in market value. We remain the leader in our industry. Behind these figures lay strong revenue growth performances around the world in local currencies: Latin America, 21%, Asia/Pacific, 14%, and Europe/Middle East/Africa, 9%. However, our US business continued sluggish and showed no growth last year. In the first quarter of 1989, IBM progress continued as both revenue and profits increased, in spite of a short-term chip manufacturing problem that slowed our shipments of large computer systems. Akers sees intensifying competition for IBM, citing rapid technological change; the proliferating needs of millions of customers; increased capabilities of thousands of competitors from small, nimble companies to large, full-product line vendors; an increasing demand for specialised software and services; increasing demand by customers for complete solutions to their business problems. As a result, Akers went on, the industry is under a good deal of stress as evidenced by pressure on profitability and decline in stock prices, including IBM’s stock price, over the last several months. Consequently, people are increasingly asking what is the future for the computer industry, and what is the future for IBM? Let me try to answer both questions. We remain convinced that the industry has a bright future. The growth driver is quite simply increasing global competition, which is telling every business to get sharp or retire from the scene. Companies with foresight and insight are eager to invest in solutions that will increase their competitiveness. Technology progress will continue at the same rate as in the past. And as a result, we estimate the information industry will continue to grow two to three times faster than real worldwide economic growth. How well will the IBM company participate in this opportunity? I believe we have positioned ourselves well with our increasing investments in research and development, an improving product line, a more efficient organisation, and, most importantly, our closer partnerships with our customers. We are the industry leader in large-scale computer systems, mid-priced computer systems, and in personal computers. We are increasing our investments significantly in software and services, the fastest growing parts of IBM. In a world with an ever-expanding international economy, IBM is the premier global company with worldwide research, development, marketing, and manufacturing doing business in 130 countries. How do we feel about the progress we are making? I’m pleased with the actions we have taken over the last several years to transform IBM, and we have more to do. We have made ourselves more efficient around the world through our new semi autonomous business product areas and our country operations, with decision making pushed closer to the firing line. Akers went on to catalogue the cuts made, notably a headcount reduced by nearly 20,000 people; representing an overall saving, he estimates, of 40,000 years of work over the next three years. As a result of these actions, revenue per employee grew from $127,000 in 1985 to $154,000 in 1988, a productivity improvement of 20%. He then turned to the product line, listing the new machines at each level, noting that our new personal computers are five times as reliable as the original personal computer. He also claimed for IBM leadership in memory, in low-cost logic, technology packaging, database software, and magnetic recording devices to name some examples. Goi
ng on to talk about partnerships, he noted that the company had forged closer links with its customers and become easier to do business with, going on to highlight new industry relationships: We have created alliances with Sears on interactive services in Prodigy; with Steve Chen, an acknowledged genius in supercomputers; with Steve Jobs and Microsoft in personal computers, and with Siemens in telecommunications. Share my vision Akers did however acknowledge that IBM’s results had been less than sparkling of late: We have the structure and the strategy in place, he said. We really need to continue to improve the financial performance of IBM, and we are committed to doing just that. I’d like to share with you my vision of how we intend to accomplish all of this. It’s a future where IBM is the world champion in meeting the needs and wants of our customers. We are in the business of making our customers increasingly competitive, not by selling them smaller and faster machines to replace more clerical duties, but rather working more closely with them to get an ever deeper understanding of their business by actively supporting their strategic plans and helping increase their productivity, he said. IBM must become a company in which the customer is, in every decision, the final arbiter… that is responsive to customer needs, and a company that won’t rest until every customer is not just satisfied, but delighted, with every association with IBM. The quarterly dividend goes to $1.21 from $1.10.
