MERKLEY'S 1ST IBM ADS PRINT EFFORT IS STILL A PRELUDE TO MAIN EVENT

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In the seven months since IBM Personal Computer Co. picked upstart Merkley Newman Harty to handle advertising, IBM has sunk from first place to third in PC sales. On May 17, IBM will begin its first broad campaign from the agency.

But don't look for "Little Tramp," "1984" or anything particularly memorable. For the small New York agency's first effort is ... an interim campaign.

The advertising, starting in The Wall Street Journal, will push revamped models of IBM's PS/ValuePoint desktop and ThinkPad portable computers with a series of executions. Some will lump the two brands together, while others tout them separately.

A full-blown campaign isn't expected until late this year; that will probably coincide with a streamlining of IBM's confusing, overlapping desktop brands-PS/1, PS/2 and ValuePoint.

IBM and Merkley were mum last week about the new print-only campaign, but IBM for weeks has been quietly seeking to lower ad industry expectations about the work.

"There is nothing earth-shattering" about the ads, said one outsider familiar with the campaign. "In fairness to Merkley, this is a Band-Aid [until the brand realignment]. It is a transition step."

But the campaign is significant: It's the first worldwide ad campaign for IBM PCs, reflecting a growing desire at the marketer for global communications. The campaign is expected to run through the summer in business and computer publications in the U.S. and abroad.

And Merkley, which won IBM's estimated $40 million U.S. PC assignment from Lintas in October, took the creative lead on the global effort. Support is coming from DDB Needham Worldwide, Paris, which won a review for the estimated $40 million European work formerly at Lintas and GGK/GGT, London. There had been speculation that DDB Needham would take the lead.

There has been rampant speculation in the ad industry-categorically denied by IBM-of problems with the IBM/Merkley relationship. Those reports stemmed from the time it took to deliver a campaign and the departure of a creative director.

Meanwhile, the executive who ran the review, former IBM PC VP-Communications C. Ray Freeman, has taken another job inside IBM. So Merkley lost its most prominent champion.

Even late last week, the buzz was that all was not well and that the account might eventually be consolidated at sister Omnicom Group shop DDB Needham.

But one knowledgeable outsider said Merkley and IBM are in close accord.

"Merkley's doing fine work," the executive said, dismissing the rhetoric about supposed problems.

The PC operation is clearly in flux, however. IBM plummeted to third place in PC sales, behind Compaq Computer Corp. and Apple Computer, with a 10.1% share of the U.S. market and 9% share of the world market in the first quarter, according to International Data Corp., Framingham, Mass.

"Overall, it seems like they've taken their eye off the ball, and there's a lot of internal indecision as to what to do with brand strategy," said Bruce Stephen, an International Data analyst.

The PC division for a time was the bright spot at ailing IBM, but it has been outdistanced by red-hot Compaq recently in marketing, advertising and products.

"Compaq is hitting on all cylinders across all channels across all product lines," Mr. Stephen said.

IBM, on the other hand, is groping for direction in PCs.

It is struggling with crucial product issues, such as whether to push PCs with Intel-based chips, popular with customers, or new PowerPC chips, in which IBM has a financial stake.

Once largely autonomous, the PC division also seems destined to return more to the IBM corporate fold under IBM Corp. Senior VP Richard Thoman, who took over the unit this month after President Robert Corrigan quit.

Mr. Thoman, a close aide to IBM Chairman Louis V. Gerstner Jr., is expected to be intimately involved in future PC ads. But he had little role in Merkley's inaugural run.

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