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IBM Expecting Delivery Delays for New Mainframe Computers


IBM Corp. said Wednesday it won't meet demand for its new mainframe computers until early next year, and Wall Street analysts faulted the world's largest technology company for a range of problems that have produced slower-than-expected sales growth.

The company told major business customers last week that many of its new "Freeway" mainframes, which were to begin shipping next month, won't be delivered until early next year, said IBM President Sam Palmisano, at the company's annual briefing for financial analysts.

The setback is the latest in a series of execution problems for Armonk, N.Y.-based IBM, which disappointed investors last month with third-quarter revenue growth of just 3%. IBM executives also said they had underestimated their need for ceramic parts that package microprocessor chips and were investing heavily in new plants to manufacture them.

"We had some problems in the third quarter, a hiccup," said Chief Executive Lou Gerstner, citing sales of IBM computer servers that are losing market share to those from faster-growing Sun Microsystems Inc. But he added, "We have a product line that was an enormous execution success for us."

IBM shares fell $2.13, to $100, on the New York Stock Exchange before the late-afternoon presentation. They fell as much as 20% on Oct. 18 after the company's profit increase matched Wall Street projections, but sales flattened unexpectedly.

"I'm really having a hard time understanding the large number of surprises," said Jay Stevens of Buckingham Research, one of several analysts with sharp questions for the once-revered Gerstner and for Palmisano, who was promoted in September to the No. 2 spot.

Toni Sacconaghi of Sanford Bernstein said he understood that the $90-billion company couldn't have all 40 of its businesses working well at the same time. But he said, "You haven't delivered on the 30 or 35 out of 40."

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