Microsoft stock up on rumor of reconciliation with IBM

May 11, 1993|By New York Times News Service

NEW YORK -- Shares of Microsoft Corp. rose yesterday on a report suggesting that the big software producer and IBM might cooperate more closely and a "strong buy" recommendation on Microsoft from a Wall Street analyst.

The Wall Street Journal reported yesterday that William Gates, chairman of Microsoft, had said he would meet this month with Louis V. Gerstner Jr., the new chief executive at IBM.

What the two men will discuss is not known, and IBM officials portrayed the meeting as mainly part of Mr. Gerstner's fact-finding effort during his first few months on the job. An outsider to the computer industry, Mr. Gerstner is meeting with a wide range of people, including IBM employees, customers, suppliers and competitors, to immerse himself in the business as he works to craft a strategy for IBM.

Microsoft shares were up $2.125 yesterday, at $89.125.

It was IBM that helped to make Microsoft a force in computing whenBig Blue entered the personal computer industry in 1981 and chose Microsoft to supply the operating software.

More recently, the two companies drifted apart as Microsoft's strength grew. Two years ago, Microsoft abandoned IBM's OS/2 operating system, which Microsoft had helped to develop, in favor of its own Windows program.

But as the computer business moves into fields like multimedia, the prospect of two of the biggest forces in the industry cooperating more broadly could once again help Microsoft, analysts say.

Prospects for IBM are more uncertain, they say, because of its continuing problems, especially in the mainframe computer business. IBM's stock price was up 25 cents yesterday, to $48.875.

Still, analysts were cautious about reading too much into a Gates-Gerstner meeting.

"If they do cooperate more in the future, does it really matter to Microsoft's bottom line?" said Mary McCaffrey, an analyst for Alex. Brown & Sons Inc. "Probably not."

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