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August 19, 1996

IBM STANDS FIRM AGAINST PRESSURE TO SPIN OFF SERVICES CO

By CBR Staff Writer

A growing band of IBM Corp’s followers on Wall Street has been growing increasingly restive that the share price is way below where they have been forecasting it should be, and are impatient for IBM to do something about it. Many have of late been coalescing around the idea that IBM should spin off its Integrated Systems Solutions Co as a separate entity – but no matter how much cheerleading they do, it seems they will be disappointed. We can be much more serving to our customers staying a part of IBM, than splitting out services separately, said Dennie Welsh, general manager of IBM’s Global Services, told Reuters. My challenge is to show the analysts the value we have and why we think we are going to continue to grow because IBM is a great incubator to be able to grow in. Welsh said that IBM wants to keep its $12,700m services arm under the IBM corporate umbrella for a few reasons, including access to IBM’s worldwide sales representatives, vast research labs and cash for deals . We have had lots of analysts ask us about it, he said. So therefore you go through the thought process (of contemplating spinning off the business). But there is no way that I could have started this business and have grown at 20% plus for 14 quarters except within IBM. At the second quarter’s end, it had a backlog of $29bn with 200 large contracts among 30,000 deals in all.

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