IBM Expected to Announce Sale of Rolm
International Business Machines is expected to announce today that it is selling all or part of its money-losing Rolm telephone equipment subsidiary, possibly to West Germany’s Siemens AG, analysts said Monday.
The pending deal was widely viewed as a clear indication of IBM’s disappointment at the performance of Rolm, a Silicon Valley telecommunications manufacturer that IBM bought with great fanfare in 1985 for $1.5 billion. Since then, analysts estimate, IBM has lost as much as $500 million.
“IBM is getting out of its mistake of buying Rolm,” said William Easterbrook, a technology analyst for Kidder, Peabody & Co. in San Francisco.
Rumors Swirling
IBM, which has declined to comment on the reports, has scheduled “a major telecommunications announcement” in New York this morning. Siemens also has declined to comment.
Analysts said the deal is expected to involve a joint venture between the two high-technology companies that should give Siemens an all-important foothold in the U.S. telecommunications market while allowing IBM to exit gracefully from an operation that has not lived up to its potential.
Easterbrook said he expects IBM to put at least half its Rolm assets in a joint venture operation with Siemens. Anything not placed in the joint venture, Easterbrook said, would be sold directly to Siemens. He said IBM would receive about $400 million from Siemens, the equivalent of the value IBM has assigned those assets.
Rumors of the deal have been swirling for the last several weeks, but confirmed details have been sketchy.
One analyst said that all of Rolm would be placed in the joint venture, that Rolm’s 2,800-employee facility in Santa Clara would be closed and that workers would be asked to transfer to the East Coast. Possible locations include Raleigh, N.C., or Boca Raton, Fla., where Siemens maintains a facility, the analyst said.
Evaporating Business
The deal with Siemens could give IBM an important tie with a company on the cutting edge of central office switches, the newest computer-to-telephone communications system and a technology in which IBM remains interested, analysts said.
Analysts said IBM had been burned by the evaporating business potential between computers and digital private branch exchanges, phone switchboards known as PBXs.
The PBX market has suffered for several years from little or no growth and bitter price competition. Furthermore, Easterbrook said, the growing popularity of personal computers, which do not need a PBX-style connection to create networks of linked desk top computers, further eroded the PBX potential for IBM.
