IBM Corp is hoping to achieve a sustained improvement in results over the next three years through a combination of modest revenue growth, stabilised gross margins and lower operating costs, according to Michael Armstrong, chairman of IBM World Trade. Addressing the Montgomery Securities Technology Conference in Santa Clara, California, Armstrong said that IBM expects turnover growth to average about 5% over the next three years, Reuters reports. Our business plans today are much more conservative, Armstrong said. We’re not dependent on unrealistic levels of revenue growth to achieve our financial goals. The company expects to stabilise its gross margins, which declined to 50% in 1991 from 56% in 1990, Armstrong said, adding that strong product leadership and reduced costs will help stabilise margins and improve its return on equity. The company also hopes to cut its selling, general and administrative costs to 23% to 24% over the next three years from 34% in 1991, which implies that the present round of job cuts will not be the last, although Armstrong indicated that most of the cost savings, which will amount to $1,000m in 1992 and $2,000m in 1993, will come from cutting 15,000 to 20,000 jobs in 1992. IBM’s panacea is its present rather woolly plan to break up into separate semi-autonomous companies.The key to growth is the segmenting of IBM into smaller units that it hopes will be more flexible and responsive to particular markets, Armstrong said: The market will pay for product leadership.
