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December 2, 1991


By CBR Staff Writer

Our analysis of what John Akers must have been saying when he said he only believed that the fourth quarter would be the best of the year – that business is absolutely horrible since the fourth quarter normally accounts for a third of total business, seems finally to have registered on Wall Street, and IBM Corp’s shares traded as low as $90.625 before recovering a little to $91.125, off 1.625 in very heavy trading: immediate trigger was that SoundView Financial Group analyst Stephen Cohen downgraded his short-term rating to hold from buy, saying that the good news he had been anticipating failed last week to boost the stock; he also told the firm’s sales force that he plans to review with a downward bias his already lower-than-average earnings estimate of $7.50 a share for 1992; expectation that IBM would renew efforts to cut costs through further headcount reductions and a faster-than-expected ramp-up of the new Summit mainframes was the basis for his going to a short-term buy in July, Cohen told Dow Jones Professional Investor Report; he now believes that IBM’s new Summit mainframe cycle will prove shorter-lived than bulls expect and he is worried about pricing pressures in IBM’s mainframe disk business, as competitor Hitachi Data Systems Corp just began shipping its own top-end drive and as Amdahl Corp starts shipping its new disk this month; Cohen has not chnaged his $4.00 a share forecast for this year – that’s before charges, but says he is concerned about revenue growth in 1992 – his estimate for next year of $7.50 a share had assumed turnover of $70,000m, or 6.5% to 7% growth, he declares.

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