IBM Plans Big Push in Crucial Europe Market
International Business Machines Corp. has launched a major offensive in Europe to win back market share from smaller European manufacturers.
Europe, which accounts for almost one-third of world computer sales, is crucial to IBM’s global strategy. But the industry giant has lost ground there, cutting Europe’s share of the company’s total profit to 42% last year from 47% in 1986.
“We are the most European of the information technology companies . . . and as a European business we’re getting more competitive,” Michael Armstrong, IBM Europe president, told reporters at a recent seminar here.
Such firms as Italy’s Ing C. Olivetti and C SpA and West Germany’s Siemens AG and Nixdorf Computer AG have made inroads into IBM’s share of a booming minicomputer market.
10,000 Personnel
“Groups like Nixdorf have made their reputations by going in, talking to customers and fitting into the niche where IBM didn’t have the applications,” said Patricia Meagher Davis, electronics analyst with broker James Capel in London.
IBM pins hopes on new minicomputer models, the Advanced System 400s, which are a response to competitors’ sales gains in this segment. More flexible than expensive mainframe machines, the mid-range computers interest businesses because they provide power for sophisticated uses such as stock control and managing automated factories.
IBM has begun a radical redeployment of its European work force, putting thousands into the field as sales and customer support staff--an area it aims to boost by 10,000 personnel by 1990.
Armstrong said the restructuring would affect about 30,000 jobs in all and cost $30 million on retraining in 1987 and 1988 alone.
Dennis Exton, European electronics analyst with brokers UBS-Phillips & Drew, said: “It’s important for IBM to have a hearts and minds campaign in Europe now as they’re about to begin shipments of the AS/400 and that could help them boost their total market share by a full 1%.”
12% to 15% of Market
IBM also wants its message to reach Europe’s governments ahead of 1992, for fear they might favor national flagships as trade barriers come down across the European community.
“IBM wants its customers to know the extent of its commitment to Europe, and governments account for a meaningful number of these customers,” Exton said.
Armstrong and other top IBM managers stressed that IBM employs more than 100,000 people, has 15 factories and has invested $1.2 billion in Europe in the past two years.
Armstrong calculated that IBM had between 12% and 15% of the total European information technology market last year and said his immediate aim was to hold that share as the market grows an estimated 10% this year.
“Our goal is to grow with the industry in Europe,” he said.
Last year, IBM Europe posted gross sales of $20.3 billion. Although this was up 14% on the previous year, the apparent gain was entirely because of the fall in the dollar. Measured in local currencies, European sales showed no growth. But higher income was reported because key European currencies gained against the dollar.
