When the IBM board meets tomorrow, the key decision it will face is how deep to cut this time. And the outcome should say a lot about how quickly and how forcefully the company's new chief executive, Louis V. Gerstner Jr., intends to place his mark on the troubled computer giant he joined in April.
Most Wall Street analysts and industry sources expect the board to take a big charge against second-quarter earnings for closing factories and selling off equipment, as the company streamlines its operations.
The charge for cutting back manufacturing capacity -- which could range from $1 billion to more than $4 billion, analysts said -- would be in addition to the $2 billion write-off announced early this month.
IBM is also expected to announce its second-quarter results after the board meeting. Analysts forecast that IBM will report an operating loss in the range of $140 million to $180 million.
Most analysts also anticipate that the board will decide tomorrow to slice IBM's dividend for the second time this year to conserve cash as the company struggles to recover. The quarterly payout stands at 54 cents, and analysts expect it to be cut by half, to 25 cents or so.
The computer industry will also be watching whether IBM names a replacement or two for its board. Three outside directors have recently decided to step down, and tomorrow's meeting will also be the last for Jack D. Kuehler, an IBM vice chairman, who is retiring.
The case for taking a huge second-quarter charge is that it works to Gerstner's advantage -- and IBM's -- to handle the necessary financial housecleaning in a bold stroke and move on with the rebuilding process. What IBM must stop, analysts say, is its recent history of taking charges quarter after quarter, year after year, reacting to shifts in the marketplace instead of mastering them.
"Death by a thousand cuts is exactly what IBM has done for years," said David Yoffie, a professor at the Harvard Graduate School of Business Administration.