IBM <IBM> REBOUND SEEN BY BERNSTEIN ANALYST International Business Machines Corp, hit by a two-year earnings slump, should begin a come-back by the end of 1987 and post strong growth in 1988, analyst Rick Martin of Sanford C. Bernstein Co Inc said. "There will be increasing momentum in earnings, albeit not until later this year," Martin said at a technology conference sponsored by the investment firm. Martin said the coming rebound reflects new product introductions in the mid-range area, rather than any drastic improvement in economic growth or U.S. capital spending. IBM, whose stock hit a 52-week low of 115-3/4 dlrs in mid-January, has come back lately. IBM was trading up 7/8 at 149-1/2 dlrs. Analysts, computer industry executives, and the company itself, have highlighted the external economic factors hampering IBM's growth. But Martin said the product cycle was key to understanding the rise and fall of IBM and other computer companies, and pointed to Digital Equipment Corp <DEC> to support his view. "By replacing the product line, earnings have soared," he said of DEC's line of VAX computers. In contrast to DEC, IBM faultered with an incompatible mid-range product line. A new computer code-named "Fort Knox" was supposed to tie together a number of IBM's mid-range systems, but the product never got off the ground, he said. Instead, aspects of the computer were integrated into the IBM 9370 machine introduced last year, and other aspects should be unwrapped by 1988, Martin said. "The major story will be a rebound in its mid-range business." He said sales of IBM's mid-range computers fell about 13 pct in 1986. But the new products will lead to 5.8 pct growth in mid-range computers this year and 30.7 pct growth in 1988. High-end computers, primarily the Sierra line, are coming to the end of their product life cycle. Although growing 22.5 pct in the midst of IBM's sharply lower 1986 year, growth will drop to 1.5 pct in 1987 and 1.9 pct in 1988, he said. By 1988, overall revenue growth should rise to about 16 pct, against 5.8 pct growth in 1987 and 2.4 pct in 1986, Martin said. Last year, IBM earned 4.8 billion dlrs on revenues of 51.3 billion dlrs. Investors asked what this all meant to DEC, whose earnings and stock have been propelled by a strong slew of product introductions in the mid-range area. In response, Martin said he did not view IBM as a threat to DEC, nor DEC as a threat to IBM, because both companies were catering largely to existing customer bases, rather than stealing market share from one another.