Nynex to Buy 81 IBM Product Centers

Times Staff Writer

International Business Machines will abandon its attempt to operate retail stores in the United States with the sale of its 81 IBM Product Centers to Nynex, parent of the telephone operating company serving New York and New England, the two companies said Tuesday.

IBM said the 6-year-old chain was no longer needed to sell small IBM computers, software, typewriters and related supplies because of the growth of its nationwide network of 2,400 authorized independent dealers.

Nynex’s acquisition comes as another of a series of moves by former Bell System operating companies to diversify into related information handling businesses. Nynex already owns 19 Datago Business Centers on the East Coast, and the acquisition will make its computer chain among the nation’s dozen largest, analysts said.

Pacific Telesis, holding company for Pacific Bell, and Bell Atlantic, holding company for telephone companies serving the Middle Atlantic, are both busily assembling chains of stores that sell computer and business telephone equipment.


The companies did not disclose the price of the deal, which is expected to be completed by June 30. But Robert Morris III, an analyst for Montgomery Securities in San Francisco, said that on the basis of other recent deals, the IBM centers might fetch $150 million to $200 million.

The IBM Product Center chain includes 13 stores in California, where competition among telephone operating companies has already been heating up. Pacific Telesis’ Pactel Information Systems subsidiary has 13 stores in an operation that it began last year, while Bell Atlantic’s 66-store chain also includes 15 Compushop stores in California.

Nonetheless, some analysts wondered whether Nynex was wise to buy a chain at a time when many in the business feel that there is a glut of computer stores. Michael D. Kennedy, financial analyst with the Gartner Group in Stamford, Conn., said IBM had never made money off the chain and had displayed little feel for the retail business.

“In an acquisition, you try to shore up your weakness with somebody else’s strength,” Kennedy said. “Here, they’re buying weakness where they’re weak. To think they can do better with them than IBM is preposterous.”

Analysts said the deal looked far better from IBM’s perspective. Peter Labe, an analyst with Drexel Burnham Lambert in New York, said the presence of the chain has caused friction with the 2,400 independent IBM computer dealers, although the product centers have never joined in the price wars that have plagued the business.