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July 18, 1990


By CBR Staff Writer

IBM management is beginning to realise that all the restructuring steps taken so far have been enough only to maintain its financial performance at the unsatisfactory levels that characterised the past five years, and that much more drastic steps will have to be taken to restore the levels of performance of the early 1980s. An earnest of this is that the company is close to deciding to get out of one of the businesses for which it is historically best-known – typewriters, and with it, mass market printers, and keyboards. According to the Wall Street Journal, analysts and industry executives say that the company is considering the sale of a whopping $3,000m of businesses centred on its Lexington, Kentucky factory, which was modernised at great expense in an effort to demonstrate how US companies could successfully compete in low-coupon volume items with the Japanese, Koreans and Taiwanese. The paper hears that IBM is talking with a potential buyer about a deal that would involve substantial debt, with executives in the division getting equity. The potential buyers include a long string of Japanese companies, and there is a very dark horse in the shape of Hanson Plc, which owns about 48% of Smith Corona Corp. The move would follow IBM’s ceding of its copier business to Eastman Kodak Co and its decision only last week to dump its automatic teller machine business into a joint venture with Diebold Inc. IBM is said to be being advised on the sale by Shearson Lehman Hutton and the mystery buyer by J P Morgan & Co and Kidder Peabody & Co. IBM came very close to confirming that the move is contemplated, issuing a statement yesterday saying IBM is in the process of considering many options as it moves to sharpen its strategic focus and remain on the leading edge of the information processing business. IBM has not concluded any transaction like the one speculated on in today’s Wall Street Journal – the paper didn’t say it had concluded an agreement, but it moved to reassure employees about the suggestion in the Journal that employment would be less secure following a buy-out by saying we have no plans to modify our full-employment practice. Any action taken by IBM would ensure that our employees are treated fairly, that service to our customers is uninterrupted and that the transaction is in the best economic interest of our company. The paper hears that agreement for the sale could be announced as soon as the end of the month.

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