A Torrent of Pink From Big Blue

WHEN THE MIGHTY FALL, IT'S NEVER A PRETTY SIGHT. But few could imagine how grim until International Business Machines announced its most traumatic cutbacks to date. In its fifth major restructuring in the past seven years, the world's largest computer company plans to shed more unprofitable and ill- fitting businesses in 1993 and slash its work force 8%, or 25,000 employees. The latest round of reductions will include the first involuntary layoffs in the company's 78-year history and will result in a $6 billion pretax charge for the fourth quarter.

In recent years, IBM has lost share in market after market, including personal computers. But the massive cuts are mainly a signal that IBM is finally acknowledging a fundamental change in its core mainframe-computer business. For years, Big Blue has tried to ignore the market's shift away from the closet-size number crunchers to less expensive but powerful desktop computers and workstations. Now declining sales of mainframes have forced IBM to face up to the transition.

Traumatic as the cutbacks are to the giant firm's employees, they underwhelmed Wall Street analysts. Many think IBM has yet to bite the final bullet, and must pare its costs and payrolls further. (See related stories beginning on page 26.)