The IBM Questions

As it will for months and maybe years to come, the Justice Department's antitrust suit against International Business Machines Corp. last week continued to pose new questions for the courts, the computer industry and the nation's securities markets.

sbWHAT WILL HAPPEN IN THE COURTS? IBM, which has produced about two-thirds of the 43,000 computers in the U.S., is charged with violation of the Sherman Act's Section 2, a broad prohibition of "monopoly" that suggests that bigness alone is bad. The most direct precedent traces to 1945, when the U.S. directed the Aluminum Co. of America to split off properties. The key opinion was written by Judge Learned Hand of the Second Circuit Court of Appeals, who decided that law "did not condone 'good trusts' and condemn 'bad' ones; it forbade all."

A more permissive view may well be taken by the Nixon Administration's newly named chief trustbuster, Richard W. McLaren, a Chicago lawyer who headed the American Bar Association's antitrust division. McLaren says that his approach will be to "look at performance as well as structure" and fol low the "rule of reason." He thus echoes Stanley Barnes, the Eisenhower Administration's activist antitrust chief.

Barnes handled a large volume of monopoly cases but settled with consent decrees to end certain practices rather than press for dissolution.

sbHOW WILL IBM CHANGE? IBM is like ly to end one practice that the Justice Department criticized: the policy of selling computers, software and related services to customers on a single-price, all-or-nothing basis. That tends to freeze out small suppliers, which can offer only pieces and parts of the total system. Aware that Justice has been investigating the computer industry for two years, IBM last month said that it would proclaim a new policy no later than July.

sbHOW COULD THE LITIGATION AFFECT IBM STOCK? After a 2-for-l split last May, the stock rose to a high of 375 in June. Since then, word of the investigation and heavy selling by mutual funds have worried the stock downward.

Last week it fell 7 3/4 points to close at 299 3/4. Doubtless the legal news will over shadow Wall Street's perennial glamour stock for some time. But there could be a benefit. In the event that IBM has to divest itself of some business, it would do so by creating a new company and distributing shares to IBM stockholders.

Presumably, investors would be happy to have a piece of any company that IBM might spin off.

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