I.B.M. Expands Line, Cuts Prices

By Barnaby J. Feder
The New York Times

February 12, 1986

The International Business Machines Corporation yesterday announced 10 percent price cuts on the two members of the Sierra family of mainframes introduced last year and introduced two less expensive members of the line, which is formally known as the 3090 series.

Prices on 308X mainframe computers were cut 21 percent and improved replacement models for the 4381 intermediate computers were announced.

Analysts said that there were no major surprises in the price cuts and the product moves, but that they were somewhat more aggressive than expected. The 10 percent price cuts in the 3090 series reduced the cost of the Model 200 to $4.5 million and the Model 400, I.B.M.'s most powerful computer, to $8.5 million.

''That kind of a cut on new products is a bit aggressive,'' said Steven Milunovich, who follows the company for the First Boston Corporation. ''It may be that they are somewhat concerned about demand.''

''The price cut might cost them as much as $70 million in terms of computers shipped but not yet paid for,'' said Ulric Weil of Weil & Associates, a Washington-based consulting firm.

Mr. Weil and several other analysts also speculated that I.B.M. earnings could be hurt if a significant number of customers canceled orders for the Model 200 to buy the less expensive Model 180. Others, however, argued that the new models would increase sales. There had been reports that potential customers for the 3090 series had been waiting for the introduction of less expensive versions.

The introduction of the new machines came after customers demanded a less expensive and less complex entry-level model of the Sierra. I.B.M. addressed that need by offering a single-processor machine; the previous low-end model had a dual processor.

The Model 150 and Model 180 introduced yesterday are priced at $1.7 million and $2.6 million, respectively. The latter, which is, in effect, half of the dual-processor Model 200, will be available in April. Shipment of the Model 150 is set to begin in October.

Prices were cut up to 21 percent on the 308X family of processors, which is being superseded by the 3090 line. Some analysts said the size of the cut might depress prices in the used-computer market enough to weaken demand for the 3090 series.

The introduction of powerful replacement models for the intermediate 4381 family, priced from $185,000 to $735,000, should improve I.B.M.'s price-performance standards by 30 to 42 percent.

''It's a good move,'' said Thomas J. Crotty, who follows I.B.M. for the Gartner Group. ''That market has been troubled for a year and a half.''

Some analysts characterized the new 4381's as catch-up products, indicating that recent product announcements by such minicomputer makers as the Digital Equipment Corporation and Data General had opened up too big a price-performance gap between them and I.B.M.

''The main benefits of today's moves will be to those with an installed I.B.M. base,'' Mr. Crotty said, referring to current users of I.B.M. computers. ''I don't think they will shake up other mainframe makers.''