Path: bloom-picayune.mit.edu!enterpoop.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!americast.com!usa-post Newsgroups: usa-today.bonus,americast.usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Fri, Oct 16 1992 Date: Fri, 16 Oct 92 04:43:26 EDT Message-ID: Lines: 289 10-15 0000 BONUS: Universal revolutionizes market USA TODAY Update Oct. 15, 1992 Source: USA TODAY:Gannett National Information Network To the credit-card industry, the globe in the AT&T Universal Card logo is a supernova, threatening to blast its competition to another galaxy. For consumers, the Universal globe heralded the dawn of an era. When Universal guaranteed no annual fee - ever - for those who signed up its first year, other issuers started jettisoning annual fees too. And Universal's variable interest rate - 9.9 percentage points above the prime lending rate, now 6% - made other issuers lower their rates too. WHAT ELSE IRKS COMPETITORS? What really bothers AT&T's competitors is the way Universal sucks in new accounts. AT&T's Universal MasterCard and Visa have pulled in 10 million customers in about two years, or 300,000 every month. From the start, AT&T's Universal Card Services decided it didn't want to satisfy customers; it wanted to delight them. That's why few cardholders leave Universal once they arrive. So it's little surprise AT&T's Universal Card Services division won a Malcolm Baldrige National Quality Award Wednesday - the third service company to win the award. In fact, the card division was specifically designed to meet Baldrige quality tenets. WHOSE IDEA WAS THE UNIVERSAL CARD? Paul Kahn, now president and CEO of Universal Card Services, brought his proposal for the Universal Card to AT&T's board of directors in November 1989. The card was launched five months later on March 26, 1990, with a television ad blitz during the Academy Awards. AT&T signed up its 1 millionth Universal Card account 78 days later. Now Universal is the fifth-largest credit-card issuer. WHAT WERE THE LINKS TO PHONE SERVICE? At least a cursory commitment to quality would have made sense for Kahn. An offended Universal Card customer could drop AT&T phone service along with the card. And the Universal Card, with its 10% discount on AT&T long-distance calls, was conceived as much to retain AT&T calling-card customers as to garner profits in the credit-card business. WHAT WAS UNIVERSAL'S PROMISE? So Universal Card Service was dedicated to quality at the outset. To Kahn, that meant creating a company whose basic tenets were the Baldrige award's seven criteria: leadership, analysis, strategic planning, human resources, management, results and customer satisfaction. WHAT WAS THE FIRST STEP? AT&T started its run for the Baldrige with the design of the Universal Card itself. AT&T had originally wanted a card that would offer a discount on long-distance calling, a high interest rate and an annual fee. Kahn insisted on the variable rate and no annual fee for charter members. WHERE DO CUSTOMERS FIT IN? But customer service is the key to Universal's approach. And at Universal Card Services, the dedication to quality borders on the fanatic. It starts with the motto in foot-high letters at the entrance to AT&T's campuslike headquarters: "The customer is the center of our universe." Banners emblazoned with Universal's quality credos hang from every hallway. Televisions throughout the complex highlight the 110 quality measurements AT&T takes daily. WHERE DOES QUALITY BEGIN? Computers measure how long customers wait before talking to a service representative. Supervisors measure representatives' phone manners by randomly listening to conversations. Quality-control people even regularly check the quality of the paper for letters sent to customers. Results of the 110 measurements are tallied daily and posted throughout the building. DOES ALL THAT ATTENTION TO DETAIL PAY? Yes. Universal Card Services handles 40,000 telephone calls a day. Its representatives resolve customer concerns in one call 95% of the time. And the unit logs more than 2,000 commendations from customers each month, either from calls or letters to the company. The division has won AT&T's internal quality award twice. DOES UNIVERSAL'S SERVICE EVER STOP? Universal's service representatives go to legendary lengths to make customers happy. Joy Van Elderen, a writer in Denver, bought a pair of hand-carved soapstone candlesticks with her Universal Card in Kenya. But the candlesticks were broken when they arrived in Denver and had no warranty from AT&T on the purchase. A Universal customer service representative contacted the store owner in Nairobi. Van Elderen got new candlesticks, and Universal got a loyal customer. "It's a great card," Van Elderen says. "They're always very helpful - and the card is free." HOW ARE EMPLOYEES TREATED? Kahn and Peter Gallagher, who oversees the company's quality program, wanted employees to feel their work was important. That's not easy in the financial services profession, where telephone representatives are the equivalent of oarsmen on a Roman galley. AT&T's solution: Empowerment. Universal Card representatives can fix most problems without having to bring in superiors. They can raise credit limits, investigate complaints or issue additional cards on their own. IS THERE EMPLOYEE INPUT? Employees can get together to change company policies and procedures, too. If employees notice something consistently wrong - multiple card solicitations sent to one person - they meet to talk about fixing it. In most cases, the employees find a solution by themselves, even if it means changing duties. Rather than punishing employees who do something wrong, AT&T rewards people for doing things right. Quarterly bonuses and regular raises are pegged to how well an employee meets goals. WHAT ABOUT SERVICES FOR EMPLOYEES? Universal Card Services goes to great lengths to take care of employees' needs, too. AT&T certifies local day-care providers and helps employees find a qualified care provider for mildly ill children. Need a car loan? AT&T credit union's rate is 6.75% for a three-year loan, vs. 9.16% for the average car loan. Universal Card representatives can also take advantage of the company health club. DOES THAT HELP LOWER INSURANCE COSTS? "I suppose it does," says Peter Gallagher. "But it's good for them, they enjoy it, and we'd give it to them even if it didn't lower costs." His efforts to keep employees happy has worked. Employee turnover among service representatives is 8% a year in a field where 40% to 50% is common. WHAT BENEFIT HAS THE UNIVERSAL MODEL DISPLAYED? Universal's commitment to quality has revolutionized the credit-card industry. Now nearly all credit-card issuers have 24-hour toll-free service numbers. So why doesn't Universal tout its customer service in its ads, as Citibank does? "Because," says Alan Schultheis, Universal's marketing chief, "Citibank's service wasn't perceived as good, and they have had to work hard to change that. We don't." Bonus Editor: Kate Coughlin. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. 08:0010150000T2030 US01- 08:0010160000B0800 BONU- R R IBM-shrinking-away-to-nothing......... A B0800 10-16 0000 BONUS: IBM shrinking away to nothing USA TODAY Update Oct. 16-18, 1992 Source: USA TODAY:Gannett National Information Network In the classic 1957 science-fiction flick "The Incredible Shrinking Man," some poor guy shrinks to almost nothingness after sailing his boat aimlessly through a mysterious fog. IBM must be feeling that way these days. The USA's largest computer maker just keeps getting smaller and smaller. After issuing dismal third-quarter results Thursday, IBM's stock shrank to a 10-year low - down 5 1:8 at $72 7:8 a share. It has cut 25% of its payroll since 1985, including 40,000 people this year alone. And IBM has slashed its manufacturing capacity a whopping 40% since 1989, scaling back operations at 30 factories worldwide. WHEN WILL IBM BEGIN TO GROW AGAIN? Not soon, say longtime industry observers. "It's a car crash in slow motion that's going to last for two to three more years," says George Colony, an IBM analyst at Forrester Research. "There's no good news coming from this company." That's a bitter pill to swallow for a corporate giant that once predicted it would have $100 billion in annual revenue by the early 1990s. In the third quarter, IBM's revenue rose just 2% from the same quarter last year to $14.7 billion. So it's unlikely that revenue will top $64 billion - last year's revenue total - for all of 1992. WHAT HAPPENED TO EARNINGS? Earnings were even worse. The company's third-quarter operating profit was just $86 million, or 15 cents a share - a 50% drop from last year and about half the lowest estimate by Wall Street analysts. IBM reported a net loss of $2.8 billion, or $4.87 a share, for the quarter because of a one-time $4.4 billion charge to pay for job reductions and manufacturing cutbacks. WHAT HAPPENED TO BIG BLUE? Many of IBM's current problems stem from the economic slowdown in Europe, where the computer giant gets almost half its sales. Frank Metz, IBM's chief financial officer, told analysts Thursday, "Our results in Europe in September were off the charts. People just stopped buying things." Even so, IBM is seeing demand shrink across many of its product lines. That's caused by leaps in technology, changes in demand and bad management, analysts say. WHY IS THE DEMAND SHRINKING? "IBM (employment) is shrinking because there are fewer computer chips on a circuit board and fewer circuit boards in a computer. Therefore, fewer people are needed to make each computer," says computer-industry analyst Bill Milton of Brown Bros. Harriman. But technology advances alone don't explain what has happened. All makers of large computers - particularly IBM, Unisys, Digital Equipment and Wang Laboratories - have been victims of a massive shift to small boxes that do more for less money. Beyond that, each of IBM's core lines of business - mainframes, midrange computers and personal computers - has unique problems. HOW HAVE MAINFRAMES BEEN AFFECTED? In a down economy, IBM's biggest problem has been selling big-ticket items like the room-size computers that account for half of IBM's annual revenue and 60% of its profits. IBM sold more than 2,000 mainframes worldwide in 1989. Last year, it sold just 1,077, a 47% drop. Yet IBM factories were geared to churn out hundreds more of the $5 million to $20 million mainframes than it is selling. IBM has a policy to avoid layoffs. So the only alternative, as the recession dragged on, was to reduce production and slash employment with voluntary severance plans. WHAT ABOUT MIDRANGE SYSTEMS? Among IBM's best-sellers are the smaller computers that run automated teller networks and department-store cash registers. IBM will sell 58,000 of its AS:400 midrange computers this year, a 12% jump from 1991. IBM's Rochester, Minn., factory is hiring 500 people because of strong demand for the machine. "It's the brightest star on the horizon for IBM at the moment," says ADM Consulting's David Andrews. In many instances, customers who used to buy IBM mainframes are buying AS:400 models. That denies IBM a lucrative mainframe sale. It also robs IBM of the profits it makes supplying loyal mainframe owners with software and service. HOW WERE PERSONAL COMPUTERS HURT? IBM is still the largest maker of PCs, accounting for almost 30% of PCs shipped last year. But IBM has been steadily losing market share to Apple and Compaq, as well as hundreds of lower-cost competitors such as Dell and Gateway. IBM recently announced it was forming a separate personal-computer division to make it more competitive, and it will come out with a low-priced line of PCs Tuesday. Analysts question the move because PCs already have a razor-thin profit margin. IS IBM SUCCEEDING? IBM doesn't break out profits for its various divisions. But analyst Bob Djurdjevic of Phoenix-based Annex Research says IBM is probably losing $1 billion a year on PCs. Despite those problems, IBM still has fans. "The computer industry is going through a difficult time, but computers are not going to go away. And IBM is still in a strong position to invest in the future," says Andrews. WHERE IS IBM PROFITABLE? IBM still makes tons of money selling peripheral products such as disk drives - which store information in computers - and software. IBM's third-quarter software revenue jumped 11% to $2.7 billion, and service revenue, which includes such things as running computer rooms for customers, climbed 38% to $1.8 billion. IBM is gaining market share in the white-hot field of computer workstations. After entering the field in 1990, the IBM RS:6000 workstation is already selling at a clip of $2 billion annual revenue. The high-performance desktop unit is stealing customers from industry leader Sun Microsystems. WHAT DO ANALYSTS EXPECT? But for analysts and investors accustomed to IBM leading the industry as well as the stock market, the computer giant's recent financial performance makes them wonder when or if IBM will regain its footing, let alone its stature. "I've been covering IBM for many years, and I can't recall them ever earning just 15 cents a share in a quarter," says analyst Milton. HOW ARE STOCKS INVOLVED? Analysts such as Colony predict that IBM will have to break into several smaller companies some time this decade, and investor frustration will be the reason. "This will not be an internal revolution but a stockholder revolution," says Colony. "This is one of the worst-performing stocks over the last 12 years. The stuff is junk." ARE THERE OTHER POSSIBILITIES? Others suggest IBM must grow smaller before it grows bigger. "In retrospect, IBM may have been retooling for the future and the future never happened," says Sam Albert, an IBM analyst and consultant. He says the total number of people leaving IBM this year could reach 50,000. Albert says IBM must slowly transform itself into a company that sells software and services computers, not one that sells them outright. Bonus Editor: Kate Coughlin. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. 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