IBM to Freeze Number of U.S. Dealers at 2,500

IBM will freeze the number of authorized U.S. dealers of its personal computers at 2,500, the company said Tuesday. The step is likely to accelerate a long-running shakeout in the computer retail business and lead to higher prices.

Although bad news for dealers wishing to expand, International Business Machines’ action was welcomed at existing outlets that have been hurt by sharp price cutting and by what many dealers considered too many retail computer stores.

“We have felt for some time that there have been too many IBM-authorized dealers in the United States,” said a spokesman for Oakland-based ComputerLand, the biggest chain of computer retail stores and an authorized IBM outlet.

IBM notified its existing dealers of the move Monday. The company cited “slackening of demand” as personal computer sales have flattened out this year. It said: “We feel we have enough coverage to satisfy the needs of our customers.”

Period of Consolidation

A spokeswoman said the company won’t authorize any new or expansion dealerships. She said decisions on replacing businesses that close will be made on a case-by-case basis.

The action by IBM, the leading producer of personal computers, takes place in a period of consolidation by retail outlets after the explosion in personal computer sales subsided. The number of stores has dipped slightly to about 4,700 from 5,000 a year ago, analysts say, with many stores being bought by large chains.

Apple Computer, the No. 2 producer, said that its authorized U.S. retail outlets have held steady at about 2,600 this year and that sales haven’t warranted any expansion. ComputerLand, which has 614 U.S. franchises and handles Apple and other major lines of personal computers, said its expansion plans are largely focused on overseas markets.

“We’ve closed more stores this year than ever before,” ComputerLand spokesman Glenn Udine said.

Analyst Kenneth Lim of Dataquest, a San Jose market research firm, said IBM was also responding to “gray market” activities by some dealers and to the pricing pressures on its company-owned product centers.