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IBM offers financing deals to customers

International Business Machines Corp, the world's largest seller of computers and related services, expanded financing discounts for small and mid-sized business customers to increase sales.

The interest rate for most purchases was reduced to 4.2 percent from 5 percent, and more corporate customers will be allowed to defer payments for 90 days with no interest, said Timothy Ohsann, an IBM spokesman.

IBM, whose sales from continuing operations rose in the third quarter after five consecutive declines, has been cutting costs to maintain profitability as corporate customers reduce computer spending.

The financing moves, similar to those used by US automakers, may boost sales and become difficult to undo if the discounts begin to hurt profit margins, investors said.

"I am just wondering if they are trying to learn from the autos," said John Jacobs, president of Jacobs & Co, which manages US$150 million and owns 44,000 IBM Shares. "I am not sure it's a good lesson to learn. The minute you start doing this, you can't stop."

IBM wants to remain competitive in the market for small and medium-sized businesses, said John Rutledge, a fund manager for Wachovia Corp's Evergreen Investments, which manages US$213 billion and owns more than 2.5 million IBM shares.

IBM defines small customers as those with as many as 99 employees. Medium-sized companies have 100 to 999 workers.

"It's a very smart move on IBM's part," Rutledge said.

"The discounts will appeal to customers "who may have thought themselves too small to qualify for financing from IBM."

IBM's moves come as corporate computer-technology departments look to find ways to spend money in their budgets for equipment and services before the end of the year, said David Grossman, an analyst with Thomas Weisel Partners, who rates IBM "buy" and says he doesn't own the shares.

The shares of Armonk, New York-based IBM rose US$1.84 to US$76.40 at 2:33pm in composite trading on the New York Stock Exchange.

They had dropped 38 percent this year.

The company is offering interest rates as low as 3.1 percent for some products including its WebSphere software for server computers and DB2 database program.

IBM's financing unit has US$37 billion in assets, 125,000 customers and is the largest financer of information-technology purchases. Other technology companies also finance business customers.

Hewlett-Packard Co's Financial Services unit had revenue of US$510 million in the third quarter.

IBM's financing offer applies to customers in the US, Canada, and some countries in Latin America. Deferred payments are available to IBM customers around the world. The promotion is valid for products shipped by Dec. 31 and for installations made by Jan. 31.
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