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March 10, 1987


By CBR Staff Writer

IBM Europe has been made to feel that it let down the US parent last year when its performance in a much more buoyant market failed to cancel out the dismal performance of IBM in the US, and the European subsidiaries are being galvanised into making strenuous efforts to ensure that 1986 tunrs out to be a one-off bad year. In an interview with the Wall Street Journal, IBM Europe president Kaspar Cassani reveals that a string of further joint ventures with European companies similar to the one announced with Fiat SpA on value-added network services last week (CI No 636) are in negotiation or being sought. And, as in the US, increasing numbers of back-room employees are being turfed out of their comfortable offices and press-ganged onto the road to swell the numbers of the sales force. So that while early retirement programmes have been instituted to slim bloated payrolls in the UK and Holland, the sales force Europe-wide has been increased by 20% or 4,000 people. But it is by no means as much fun to work for IBM as it used to be – areas like the press and publicity departments are seeing their staff and resources drastically trimmed, and while the cuts in things like travel budgets were painful enough last year, the hurt will be substantially greater this year as those discretionary budgets are trimmed another 10% to 20%. A further arm in the recovery strategy is visible in the sudden rush to implement and observe European industry standards where IBM has hitherto adopted a sturdy not-invented-here attitude to anything – like X25 packet-switching – that the non-IBM world embraced. For the first seven or eight years of existence of the X25 standard, IBM offered the most grudging solutions it could get away with, making it possible to link IBM mainframes to packet nets only with very expensive solutions that operatedvery inefficiently. No sign of that attitude in IBM’s adoption of the X400 message handling protocol: the company has taken a decision to be seen to be firmly in favour of the standard. But did IBM really do that badly in Europe in 1986? Superficially no: in dollar terms, sales were up 22% at $17,780m and net profits 7.7% to $2,270m. But while IBM declines to give those figures in local currencies, the Journal has converted them back into European Currency Units, which gives a rough guide to performance in local currencies. On that basis, IBM Europe saw profits down 9.7% to 2,130m ECUs on sales up just 1.6% at 16,690m ECUs. But Cassani is by no means disheartened by the European market climate – he says that sales to government are much less restricted by buy-local policies than they were five years ago, and that the two or three years that Europe lags behind the US in computers represents a market waiting to be filled. But he also notices a very big upsurge in business done here by the Japanese.

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