Eric: I hoped my post would evince some interesting responses - and your's was certainly that - thanks. Your question about the "normal" SG&A for a services business should be an easy one for someone in that type of business, or someone familiar with IBM's financials - any offers, John Koligman?
You were also right to concentrate on increased growth in Services. They expect the $1.6 billion in 1Q ($6.4 billion pro rata for the year) to become $15 billion by 2002. They commented that it was accelerating now. Greater volume should, by itself, reduce the SG&A percentage. Anecdotal evidence, as well as Rosen comments, suggest that there is a lot of overlap and quite a lot of redundancy in some functions. I don't want to underestimate the task, but given that they have been working on it for nine months, it should not take too much longer to whip into shape once their is a will to do so.
I also liked your other ideas. In general, a super-efficient services division would be a very strong adjunct to marketing. |
