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Nynex To Buy IBM Product Centers

April 22, 1986

NEW YORK (AP) _ International Business Machines Corp. is getting out of the computer-store business in the United States, selling its 81 domestic Product Centers to Nynex Corp., the companies said Tuesday.

IBM said its network of 2,400 authorized dealers has matured enough that it no longer needs a chain of company-owned stores to sell and service its personal computers, typewriters and related supplies.

Nynex is buying the stores as part of its diversification from its base as the Bell holding company providing local phone service in New York and New England, Nynex officials said.

Terms of the deal were not disclosed. But Robert Morris III, an analyst for Montgomery Securities in San Francisco, said that on the basis of other recent deals, the IBM centers might fetch $150 million to $200 million.

Nynex would become owner of one of the three largest computer retail chains in the country by combining the IBM Product Centers in 33 states and the District of Columbia with its own 19, soon to be 21, Datago Business Centers, the company said.

The other top company-owned chains are those of Businessland Inc. and Sears, Roebuck & Co.

Analysts took a mixed view on whether the deal was good for Nynex. Computer retailing is a cutthroat business and several smaller chains have gone out of business recently. Also, they noted, IBM might not have left the business if it saw potential for strong growth.

″The really important accounts don’t stroll into a product center and say, ’What have you got?‴ said Tom Henkel, a senior market analyst for the Yankee Group, a consulting firm.

Nynex and the six other Bell holding companies have been on a ″frenzied″ buying expedition to expand out of their regulated phone businesses into unregulated nationwide information-handling businesses, said Fulton Holmes, an analyst for Thomson McKinnon Securities.

Nynex seems to be betting that it will gradually be permitted to offer some kinds of long-distance service, in which case the computer stores could give it an important foothold, Holmes said. But if regulators bar it from long- distance, the computer stores could become excess baggage, he said.

In a related development, New York Telephone Co. confirmed Tuesday that it plans to offer big companies a way to get sophisticated voice and data transmission services without creating their own private networks.

The service is intended to thwart the problem of ″bypass,″ in which lucrative big customers take their calls off New York Telephone’s own network and send them through private lines. It was jointly developed by Nynex and Northern Telecom Ltd. of Toronto, New York Tel spokesman James Crosson said.

A Nynex subsidiary, Nynex Business Information Systems Co., will operate the roughly 100 retail stores under the new name of Nynex Business Centers, Nynex officials said. As part of the deal, Nynex is entitled to open authorized IBM dealerships at three additional locations.

The deal is scheduled to be completed by June 30, assuming it receives clearance from the government for antitrust considerations, the companies said.

IBM’s product centers, which started in 1980, market IBM personal computers, typewriters and related supplies. Nynex’s Datago centers sell personal computers from IBM and other companies as well as telephones, local area networks, software and supplies.

IBM will continue to operate its product centers outside the United States, according to Allen Krowe, IBM’s senior vice president for finance and planning. He said there are three or four in Canada and 15 in Europe.

IBM’s product centers achieved their purpose of helping the company enter the booming market for personal computers, Krowe said. He said it was company policy to decline comment on the profitability of individual units of the company.

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