Analysts tend to take the heat off IBM Corp between reporting periods and the shares start floating up into the low 50s, but next week’s second quarter report is now dominating sentiment and the shares are sliding into the low 40s – and Chicago Corp director of research Rick Martin sees the price dropping to $36 in the next six to 12 months, Dan Dorfman reported on CNBC-TV: he told Dorfman that IBM will soon cut 25,000 jobs, plus an additional 25,000 that analysts have been forecasting and that IBM could cut another 50,000 jobs later this year – and that would cause the book value to slide to about $36 or $37 a share, at which point the company would have to be seen as an attractive target for acquisition and break-up; Martin is a veteran IBM analyst but he told Reuters he no longer closely follows IBM or compiles earnings estimates; Dorfman reported that for every 10,000 employees cut from IBM’s workforce, the book value drops between $1.25 and $1.50 a share; IBM and one of its biggest mainframe rivals, Amdahl Corp have engaged in massive discounting, which John Jones at Salomon Brothers says is as high as 60% – It looks like a tough quarter, said Jones; It’s tougher than usual because of the softness in Europe… if there is a bright spot, it’s business in the US, but in the second half of the year it looks like it might be softening… our posture has been one of caution.
