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July 22, 1994

IBM QUIETLY CONFIDENT

By CBR Staff Writer

Louis Gerstner has put back the conference call on its figures to mid-morning, so nothing out of it arrived in time for the story on page six, but we now know that chief financial officer Jerome York told analysts that IBM is on track to cut operating expenses by $3,500m this year, up from the $3,000m promised earlier; IBM cut its overall headcount by 8,000 in the second quarter, after 3,000 left in the first, but 20,000 are still under sentence of firing; I would not get too worried about this issue, York said, referring to analysts’ comments recently that the company is behind in its headcount reduction plan – We can either exceed the 215,000 or we can fall short, he said, adding that some of IBM’s businesses are performing more strongly now than when the plan was put together last July Our focus is primarily on expenses, and secondarily on personnel, he noted; IBM is currently sold out of mainframe computers for the rest of the year, which suggests it may have to buy some OEM from Hitachi Ltd even before it planned, simply to meet demand; sales of the AS/400 took a double-digit dive in the second quarter, but the company does expect to see positive growth for the balance of the year; and growth in personal computer sales, where IBM clearly had a horrible time in the US with falling revenues, was below expectations; on a worldwide basis, personal computer sales were up in the mid-single digits in the quarter, the rate crashing from a bit over 20% in first quarter; it is simplifying its structure in the personal computer business as well as consolidating its operations, but York declined to comment further on that topic – formal announcement of the moves is expected at the month-end.

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