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February 11, 1987

IBM EUROPE PROFITS WERE HURT BY PRICE-CUTTING, ANNUAL REPORT WILL SHOW

By CBR Staff Writer

Draft copies of IBM’s 1986 annual report are beginning to circulate in the US, and various sources have published selected figures from it. Among the most striking is the pain that strenuous price-cutting caused in the Europe/Middle East/Africa division, where turnover was up 22% at $17,800m, but profits rose only 8.1% to $2,270m. The real crash came in the US, where business was up 11.2% at $28,420m, but profits crashed 54% to $1,600m. A partial breakdown of the US business shows that the low-end went into serious decline, with total Personal Computer, typewriter and office equipment – sales and rentals – fell 24% to $4,660m. IBM’s thunder into ASCII terminals and other OEM peripherals, and its much-touted highly automated printer factory got the thumbs-down from the US market too – peripherals business in the US was down 24% at $5,570m. And poor sales of System 36 and 38 dragged even CPUs down – despite good business with the 3090s, sales and rentals of processors fell 5% to $5,500m. IBM’s efforts to trim its coat according to its cloth saw a 22% cut in worldwide capital expenditure to $4,700m, while inventories were by reduced 13% to $9,010m – and would have been $600m lower but for the plunging dollar, which inflated the values of foreign inventories on translation.

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