|Logos of IBM|
International Business Machines (IBM) is a multinational computer technology and IT consulting corporation headquartered in Armonk, New York, United States. IBM originated from the unification of several companies that worked to automate routine business transactions, including the first companies to build punched card-based data tabulating machines and build time clocks. In 1911, these companies were amalgamated into the Computing-Tabulating-Recording Company (CTR).
Thomas J. Watson (1874–1956) joined the company in 1914 as General Manager, and became its president in 1915. In 1924, the company changed its name to "International Business Machines." IBM expanded into electric typewriters and other office machines. Watson was a salesman whose goal was to build a highly motivated, very well paid sales force that could craft solutions for clients unfamiliar with the latest technology.
IBM's first experiments with computers in the 1940s and 1950s were modest advances on the card-based system. Its breakthrough came in the 1960s with its System/360 family of mainframe computers. IBM offered a full range of hardware, software, and service agreements, so that users, as their needs grew, would stay with IBM (aka "Big Blue.") Since most end-user software was custom-written by in-house programmers and would run on only one brand of computers, it was expensive to switch brands. Brushing off clone makers (aka plug-compatible hardware systems), such as Amdahl, and facing down a federal anti-trust suit, the company sold reputation and security as well as hardware and system software and was one of the most admired American corporations of the 1970s and 1980s.
IBM struggled in the late 1980s to 1990s – losses in 1993 exceeded $8 billion – as the mainframe corporation failed to adjust quickly enough to the Unix open systems and personal computer revolutions. Desktop machines and Unix midrange computers had the power needed and were easier and less expensive for both users and managers than multi-million-dollar mainframes. IBM introduced a Unix line and a line of personal computers. Clone makers undersold IBM, while the profits went to chip manufacturers like Intel or software corporations like Microsoft.
After a series of reorganizations, IBM remains one of the world's largest computer companies and systems integrators. With over 400,000 employees worldwide as of 2014, IBM holds more patents than any other U.S. based technology company and has twelve research laboratories worldwide. The company has scientists, engineers, consultants, and sales professionals in over 175 countries. IBM employees have earned five Nobel Prizes, four Turing Awards, five National Medals of Technology, and five National Medals of Science.
Main article: Computing-Tabulating-Recording Company
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The roots of IBM date back to the 1880s, tracing from four predecessor companies:
On June 16, 1911, these four companies were amalgamated into a new holding company named the Computing-Tabulating-Recording Company (CTR), based in Endicott. The amalgamation was engineered by noted financier Charles Flint. Flint remained a member of the board of CTR until his retirement in 1930. At the time of the amalgamation, CTR had 1,300 employees and offices and plants in Endicott and Binghamton, New York; Dayton, Ohio; Detroit, Michigan; Washington, D.C.; and Toronto, Ontario.
After amalgamation, the individual companies continued to operate using their established names, as subsidiaries of CTR, until the holding company was eliminated in 1933. The divisions manufactured a wide range of products, including employee time-keeping systems, weighing scales, automatic meat slicers, coffee grinders, and punched card equipment. The product lines were very different; Flint stated that the "allied" consolidation:
...instead of being dependent for earnings upon a single industry, would own three separate and distinct lines of business, so that in normal times the interest and sinking funds on its bonds could be earned by any one of these independent lines, while in abnormal times the consolidation would have three chances instead of one to meet its obligations and pay dividends.
Of the companies amalgamated to form CTR, the most technologically significant was The Tabulating Machine Company, founded by Herman Hollerith, and specialized in the development of punched card data processing equipment. Hollerith's series of patents on tabulating machine technology, first applied for in 1884, drew on his work at the U.S. Census Bureau from 1879 to 1882. Hollerith was initially trying to reduce the time and complexity needed to tabulate the 1890 Census. His development of punched cards in 1886 set the industry standard for the next 80 years of tabulating and computing data input.
In 1896, The Tabulating Machine Company leased some machines to a railway company but quickly focused on the challenges of the largest statistical endeavor of its day – the 1900 US Census. After winning the government contract, and completing the project, Hollerith was faced with the challenge of sustaining the company in non-Census years. He returned to targeting private businesses in the United States and abroad, attempting to identify industry applications for his automatic punching, tabulating and sorting machines. In 1911, Hollerith, now 51 and in failing health sold the business to Flint for $2.3 million (of which Hollerith got $1.2 million), who then founded CTR.
When the diversified businesses of CTR proved difficult to manage, Flint turned for help to the former No. 2 executive at the National Cash Register Company (NCR), Thomas J. Watson Sr. Watson became General Manager of CTR in 1914 and President in 1915. By drawing upon his managerial experience at NCR, Watson quickly implemented a series of effective business tactics: generous sales incentives, a focus on customer service, an insistence on well-groomed, dark-suited salesmen, and an evangelical fervor for instilling company pride and loyalty in every worker. As the sales force grew into a professional and knowledgeable arm of the company, Watson focused their attention on providing large-scale tabulating solutions for businesses, leaving the market for small office products to others. He also stressed the importance of the customer. The strategy proved successful, as, during Watson's first four years, revenues doubled to $2 million, and company operations expanded to Europe, South America, Asia, and Australia.
At the helm during this period, Watson played a central role in establishing what would become the IBM organization and culture. He launched a number of initiatives that demonstrated an unwavering faith in his workers. He hired the company's first disabled worker in 1914, he formed the company's first employee education department in 1916 and in 1915 he introduced his favorite slogan, "THINK", which quickly became the corporate mantra. Watson boosted company spirit by encouraging any employee with a complaint to approach him or any other company executive – widely known as the Open Door policy. He also sponsored employee sports teams, family outings, and a company band, believing that employees were most productive when they were supported by healthy and supportive families and communities. These initiatives – each deeply rooted in Watson's personal values system – became core aspects of IBM culture for the remainder of the century.
On February 14, 1924, the name was formally changed to International Business Machines.
Our products are known in every zone. Our reputation sparkles like a gem. We've fought our way through and new fields we're sure to conquer too. For the ever-onward IBM— "Ever Onward", IBM employee songbook
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Watson mandated strict rules for employees, including a dress code of dark suits, white shirts and striped ties, and no alcohol, whether working or not. He led the singing at meetings of songs such as "Ever Onward" from the official IBM songbook. The company launched an employee newspaper, Business Machines, which unified coverage of all of IBM's businesses under one publication. IBM introduced the Quarter Century Club, to honor employees with 25 years of service to the company, and launched the Hundred Percent Club, to reward sales personnel who met their annual quotas. In 1928, the Suggestion Plan program – which granted cash rewards to employees who contributed viable ideas on how to improve IBM products and procedures – made its debut.
IBM and its predecessor companies made clocks and other time recording products for 70 years, culminating in the 1958 sale of the IBM Time Equipment Division to Simplex Time Recorder Company. IBM manufactured and sold such equipment as dial recorders, job recorders, recording door locks, time stamps and traffic recorders.
The company also expanded its product line through innovative engineering. Behind a core group of inventors – James W. Bryce, Clair Lake, Fred Carroll, and Royden Pierce – IBM produced a series of significant product innovations.
In 1920, the company introduced the first complete school time control system, and its first printing tabulator. Three years later the company introduced the first electric keypunch. 1924's Carroll Rotary Press produced punched cards at record setting speeds. In 1928, the company held its first customer engineering education class. It also introduced the 80-column punched card in 1928, which doubled its information capacity. This new format, soon dubbed the "IBM Card", became and remained an industry standard until the 1970s.
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The Great Depression of the 1930s presented an unprecedented economic challenge. The company continued investing in people, manufacturing, and technological innovation despite the difficult economic times. Rather than reduce staff, Watson hired additional employees in support of President Franklin Roosevelt's National Recovery Administration plan – including salesmen and engineers.
During this time, IBM was among the first corporations to provide group life insurance (1934), survivor benefits (1935), and paid vacations (1936). The company also opened the IBM Schoolhouse in Endicott to provide education and training for IBM employees and increased IBM's research capabilities by building a modern research laboratory on the Endicott manufacturing site.
With these internal investments, Watson was, in essence, gambling on the future. It was IBM's first 'Bet the Company' gamble. IBM factories were running at capacity for six years with no market to sell to, creating a huge inventory of unused tabulating equipment, straining IBM's resources. To reduce the cash drain, the struggling Dayton Scale Division (the food services equipment business) was sold in 1933 to Hobart Manufacturing for stock. When the Social Security Act of 1935 – labeled as "the biggest accounting operation of all time" – came up for bid, IBM was the only bidder that could quickly provide the necessary equipment. Watson's gamble brought the company a landmark government contract to maintain employment records for 26 million people. IBM's successful performance on the contract soon led to other government orders, and by the end of the decade, IBM had not only safely negotiated the Depression but risen to the forefront of the industry. Watson's Depression-era decision to invest heavily in technical development and sales capabilities, education to expand the breadth of those capabilities, and his commitment to the data processing product line laid the foundation for 50 years of IBM growth and successes.
Watson's focus on international expansion proved an equally key component of the company's 20th-century growth and success. Having witnessed the havoc the First World War wrought on society and business, he envisioned commerce as an obstacle to war. He saw business interests and peace as being mutually compatible. In fact, he felt so strongly about the connection between the two that he had his slogan "World Peace Through World Trade" carved into the exterior of IBM's new World Headquarters (1938) in New York City. The slogan became an IBM business mantra, and Watson campaigned for the concept with global business and government leaders. He served as an informal, unofficial government host for world leaders when they visited New York, and received numerous awards from foreign governments for his efforts to improve international relations through the formation of business ties.
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Main article: IBM during World War II
In the decades leading up to the onset of WW2 IBM had operations in many countries that would be involved in the war, on both the side of the Allies and the Axis. IBM had a lucrative subsidiary in Germany, which it was the majority owner of, as well as operations in Poland, Switzerland, and other countries in Europe. As with most other enemy-owned businesses in Axis countries, these subsidiaries were taken over by the Nazis and other Axis governments early on in the war. The headquarters in New York meanwhile worked to help the American war effort.
IBM's product line shifted from tabulating equipment and time recording devices to Sperry and Norden bombsights, Browning Automatic Rifles and the M1 Carbine, and engine parts – in all, more than three dozen major ordnance items and 70 products overall. Watson set a nominal one percent profit on those products and used the profits to establish a fund for widows and orphans of IBM employee war casualties.
Allied military forces widely used IBM's tabulating equipment for mobile records units, ballistics, accounting and logistics, and other war-related purposes. There was extensive use of IBM punched-card machines for calculations made at Los Alamos National Laboratory during the Manhattan Project for developing the first atomic bombs. During the War, IBM also built the Automatic Sequence Controlled Calculator, also known as the Harvard Mark I for the U.S. Navy – the first large-scale electromechanical calculator in the U.S..
In 1933 IBM had acquired the rights to Radiotype, an IBM Electric typewriter attached to a radio transmitter. "In 1935 Admiral Richard E. Byrd successfully sent a test Radiotype message 11,000 miles from Antarctica to an IBM receiving station in Ridgewood, New Jersey" Selected by the Signal Corps for use during the war, Radiotype installations handled up to 50,000,000 words a day.
To meet wartime product demands, IBM greatly expanded its manufacturing capacity. IBM added new buildings at its Endicott, New York plant (1941), and opened new facilities in Poughkeepsie, New York (1941), Washington, D.C. (1942), and San Jose, California (1943). IBM's decision to establish a presence on the West Coast took advantage of the growing base of electronics research and other high technology innovation in the southern part of the San Francisco Bay Area, an area that came to be known decades later as Silicon Valley.
IBM was, at the request of the government, the subcontractor for the Japanese internment camps' punched card project.
IBM punched card equipment was used for cryptanalysis (code breaking) by US Army and Navy organizations, Arlington Hall and OP-20-G and similar Allied organizations, including the (Central Bureau and the Far East Combined Bureau).
The Nazis made extensive use of Hollerith equipment and IBM's majority-owned German subsidiary, Deutsche Hollerith Maschinen GmbH (Dehomag), supplied this equipment from the early 1930s. This equipment was critical to Nazi efforts to categorize citizens of both Germany and other nations that fell under Nazi control through ongoing censuses. This census data was used to facilitate the round-up of Jews and other targeted groups, and to catalog their movements through the machinery of the Holocaust, including internment in the concentration camps.
As with hundreds of foreign-owned companies that did business in Germany at that time, Dehomag came under the control of Nazi authorities prior to and during World War II. A Nazi, Hermann Fellinger, was appointed by the Germans as an enemy-property custodian and placed at the head of the Dehomag subsidiary.
Journalist and historian Edwin Black asserts in IBM and the Holocaust that the seizure of the German subsidiary was a ruse. He writes, "The company was not looted, its leased machines were not seized, and [IBM] continued to receive money funneled through its subsidiary in Geneva." In his book he argues that IBM was a supplier to the Nazi regime long after they should have stopped dealing with them. IBM continued to service and expand services to the Third Reich until the seizure of Dehomag after the 1941 United States Declaration of War with Germany.
IBM responded that the book was based upon "well-known" facts and documents that it had previously made publicly available and that there were no new facts or findings. IBM also denied withholding any relevant documents. Writing in the New York Times, Richard Bernstein argued that Black overstates IBM's culpability. Other historians also argue about IBM's implicit knowledge and even Nazi use of tabulating machines in the manner that Black claims.
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IBM had expanded so much by the end of the War that the company faced a potentially difficult situation – what would happen if military spending dropped sharply? One way IBM addressed that concern was to accelerate its international growth in the years after the war, culminating with the formation of the World Trade Corporation in 1949 to manage and grow its foreign operations. Under the leadership of Watson's youngest son, Arthur K. 'Dick' Watson, the WTC would produce half of IBM's bottom line by the 1970s.
Despite introducing its first computer a year after Remington Rand's UNIVAC in 1951, within five years IBM had 85% of the market. A UNIVAC executive complained that "It doesn't do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen". With the death of Founding Father Thomas J. Watson Sr. on June 19, 1956, at age 82, IBM experienced its first leadership change in more than four decades. The mantle of chief executive fell to his eldest son, Thomas J. Watson, Jr., IBM's president since 1952.
The new chief executive faced a daunting task. The company was in the midst of a period of rapid technological change, with nascent computer technologies – electronic computers, magnetic tape storage, disk drives, programming – creating new competitors and market uncertainties. Internally, the company was growing by leaps and bounds, creating organizational pressures and significant management challenges. Lacking the force of personality that Watson Sr. had long used to bind IBM together, Watson Jr. and his senior executives privately wondered if the new generation of leadership was up to the challenge of managing the company through this period. "We are," wrote one longtime IBM executive in 1956, "in grave danger of losing our "eternal" values that are as valid in electronic days as in mechanical counter days."
Watson Jr. responded by drastically restructuring the organization mere months after his father died, creating a modern management structure that enabled him to more effectively oversee the company. He codified well known but unwritten IBM practices and philosophy into formal corporate policies and programs – such as IBM's Three Basic Beliefs, and Open Door and Speak Up! Perhaps the most significant of which was his shepherding of the company's first equal opportunity policy letter in 1953, one year before the U.S. Supreme Court decision in Brown vs. Board of Education and 11 years before the Civil Rights Act of 1964.
He continued to expand the company's physical capabilities – in 1952 IBM San Jose launched a storage development laboratory that pioneered disk drives. Major facilities would later follow in Rochester, Minnesota; Greencastle, Indiana; Kingston, New York; and Lexington, Kentucky. Concerned that IBM was too slow in adapting transistor technology Watson requested a corporate policy regarding their use, resulting in this 1957 product development policy statement: "It shall be the policy of IBM to use solid-state circuitry in all machine developments. Furthermore, no new commercial machines or devices shall be announced which make primary use of tube circuitry."
Watson Jr. also continued to partner with the United States government to drive computational innovation. The emergence of the Cold War accelerated the government's growing awareness of the significance of digital computing and drove Department of Defense supported computer development projects in the 1950s, including the SAGE interceptor early detection air defense system.
In 1952, IBM began working with MIT's Lincoln Laboratory to finalize the design of an air defense computer. The merger of academic and business engineering cultures proved troublesome, but the two organizations finally hammered out a design by the summer of 1953, and IBM was awarded the contract to build two prototypes in September. In 1954, IBM was named as the primary computer hardware contractor for developing SAGE for the United States Air Force. Working on this computing and communications system, IBM gained access to pioneering research being done at Massachusetts Institute of Technology on the first real-time, digital computer. This included working on additional computer technology advancements such as magnetic core memory, a real-time operating system, an integrated video display, light guns, the first effective algebraic computer language, analog-to-digital and digital-to-analog conversion techniques, digital data transmission over telephone lines, duplexing, multiprocessing, and geographically distributed networks. IBM built fifty-six SAGE computers at the price of US$30 million each, and at the peak of the project devoted more than 7,000 employees (20% of its workforce) to the project. SAGE had the largest computer footprint ever and continued in service until 1984.
More valuable to IBM in the long run than the profits from governmental projects was the access to cutting-edge research into digital computers being done under military auspices. IBM neglected, however, to gain an even more dominant role in the nascent industry by allowing the RAND Corporation to take over the job of programming the new computers, because, according to one project participant, Robert P. Crago, "we couldn't imagine where we could absorb two thousand programmers at IBM when this job would be over someday, which shows how well we were understanding the future at that time." IBM would use its experience designing massive, integrated real-time networks with SAGE to design its SABRE airline reservation system, which met with much success.
These government partnerships, combined with pioneering computer technology research and a series of commercially successful products (IBM's 700 series of computer systems, the IBM 650, the IBM 305 RAMAC with disk drive memory, and the IBM 1401) enabled IBM to emerge from the 1950s as the world's leading technology firm.
In the five years since the passing of Watson Sr., IBM was two and a half times bigger, its stock had quintupled, and of the 6000 computers in operation in the United States, more than 4000 were IBM machines.
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On April 7, 1964, IBM introduced the revolutionary System/360, the first large "family" of computers to use interchangeable software and peripheral equipment, a departure from IBM's existing product line of incompatible machines, each of which was designed to solve specific customer requirements. The idea of a general-purpose machine was considered a gamble at the time.
See also: History of CP/CMS
Within two years, the System/360 became the dominant mainframe computer in the marketplace and its architecture became a de facto industry standard. During this time, IBM transformed from a medium-sized maker of tabulating equipment and typewriters into the world's largest computer company.
In 1969 IBM "unbundled" software and services from hardware sales. Until this time customers did not pay for software or services separately from the high price for the hardware. Software was provided at no additional charge, generally in source code form. Services (systems engineering, education and training, system installation) were provided free of charge at the discretion of the IBM Branch office. This practice existed throughout the industry.
IBM's unbundling is widely credited with leading to the growth of the software industry. After the unbundling, IBM software was divided into two main categories: System Control Programming (SCP), which remained free to customers, and Program Products (PP), which were charged for. This transformed the customer's value proposition for computer solutions, giving a significant monetary value to something that had essentially been free. This helped enable the creation of the software industry. Similarly, IBM services were divided into two categories: general information, which remained free and provided at the discretion of IBM, and on-the-job assistance and training of customer personnel, which were subject to a separate charge and were open to non-IBM customers. This decision vastly expanded the market for independent computing services companies.
The company began four decades of Olympic sponsorship with the 1960 Winter Games in Squaw Valley, California. It became a recognized leader in corporate social responsibility, joining federal equal opportunity programs in 1962, opening an inner-city manufacturing plant in 1968, and creating a minority supplier program. It led efforts to improve data security and protect privacy. It set environmental air/water emissions standards that exceeded those dictated by law and brought all its facilities into compliance with those standards. It opened one of the world's most advanced research centers in Yorktown, New York. Its international operations produced more than half of IBM's revenues by the early 1970s. The resulting technology transfer shaped the way governments and businesses operated around the world. IBM personnel and technology played an integral role in the space program and landing the first men on the moon in 1969. In that same year, it changed the way it marketed its technology to customers, unbundling hardware from software and services, effectively starting today's software and services industry. See unbundling of software and services, below. IBM was massively profitable, with a nearly fivefold increase in revenues and earnings during the 1960s.
In 1967 Thomas John Watson Jr. announced that IBM would open a large-scale manufacturing plant at Boca Raton, Florida to produce its System/360 Model 20 midsized computer. On March 16, 1967, a headline in the Boca Raton News announced "IBM to hire 400 by year's end." The plan was for IBM to lease facilities to start making computers until the new site could be developed. A few months later, hiring began for assembly and production control trainees. IBM's Juan Rianda moved from Poughkeepsie, New York, to become the first plant manager at IBM's new Boca operations. To design its new campus, IBM commissioned architect Marcel Breuer (1902–1981), who worked closely with American architect Robert Gatje (1927–2018). In September 1967, the Boca team shipped the first IBM System/360 Model 20 to the City of Clearwater – the first computer in its production run. A year later, IBM 1130 Computing Systems were being produced and shipped. By 1970, IBM's Boca workforce grew to around 1,300 in part due to a Systems Development Engineering Laboratory being added to the division's operations.
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The Golden Decade of the 1960s was a hard act to follow, and the 1970s got off to a troubling start when CEO Thomas J. Watson Jr. suffered a heart attack and retired in 1971. For the first time since 1914 – nearly six decades – IBM would not have a Watson at the helm. Moreover, after just one leadership change over those nearly 60 years, IBM would endure two in two years. T. Vincent Learson succeeded Watson as CEO, then quickly retired upon reaching the mandatory retirement age of 60 in 1973. Following Learson in the CEO office was Frank T. Cary, a 25-year IBMer who had run the data processing division in the 1960s.
Datamation in 1971 stated that "the perpetual, ominous force called IBM rolls on". The company's dominance let it keep prices high and rarely update products, all built with only IBM components. During Cary's tenure as CEO, the IBM System/370 was introduced in 1970 as IBM's new mainframe. The S/370 did not prove as technologically revolutionary as its predecessor, the System/360. From a revenue perspective, it more than sustained the cash cow status of the 360.
A less successful effort to replicate the 360 mainframe revolution was the Future Systems project. Between 1971 and 1975, IBM investigated the feasibility of a new revolutionary line of products designed to make obsolete all existing products in order to re-establish its technical supremacy. This effort was terminated by IBM's top management in 1975. By then it had consumed most of the high-level technical planning and design resources, thus jeopardizing progress of the existing product lines (although some elements of FS were later incorporated into actual products).
Other IBM innovations during the early 1970s included the IBM 3340 disk unit – introduced in 1973 and known as "Winchester" after IBM's internal project name – was a storage technology which more than doubled the information density on disk surfaces. Winchester technology was adopted by the industry and used for the next two decades.
Some 1970s-era IBM technologies emerged to become facets of everyday life. IBM developed magnetic stripe technology in the 1960s, and it became a credit card industry standard in 1971. The IBM-invented floppy disk, also introduced in 1971, became the standard for storing personal computer data during the first decades of the PC era. IBM Research scientist Edgar 'Ted' Codd wrote a seminal paper describing the relational database, an invention that Forbes magazine described as one of the most important innovations of the 20th century. The IBM 5100, 50 lbs. and $9000 of personal mobility, was introduced in 1975 and presaged – at least in function if not size or price or units sold – the Personal Computer of the 1980s. IBM's 3660 supermarket checkout station, introduced in 1973, used holographic technology to scan product prices from UPC bar codes, which itself was based a 1952 IBM patent that became a grocery industry standard. Also in 1973, bank customers began making withdrawals, transfers and other account inquiries via the IBM 3614 Consumer Transaction Facility, an early form of today's Automatic Teller Machines.
IBM had an innovator's role in pervasive technologies that were less visible as well. In 1974, IBM announced Systems Network Architecture (SNA), a networking protocol for computing systems. SNA is a uniform set of rules and procedures for computer communications to free computer users from the technical complexities of communicating through local, national, and international computer networks. SNA became the most widely used system for data processing until more open architecture standards were approved in the 1990s. In 1975, IBM researcher Benoit Mandelbrot conceived fractal geometry – a new geometrical concept that made it possible to describe mathematically the kinds of irregularities existing in nature. Fractals had a great impact on engineering, economics, metallurgy, art and health sciences, and are integral to the field of computer graphics and animation.
A less successful business endeavor for IBM was its entry into the office copier market in the 1970s, after turning down the opportunity to purchase the xerography technology. The company was immediately sued by Xerox Corporation for patent infringement. Although Xerox held the patents for the use of selenium as a photoconductor, IBM researchers perfected the use of organic photoconductors which avoided the Xerox patents. The litigation lasted until the late 1970s and was ultimately settled. Despite this victory, IBM never gained traction in the copier market and withdrew from the marketplace in the 1980s. Organic photoconductors are now widely used in copiers.
Throughout this period, IBM was litigating the antitrust suit filed by the Justice Department in 1969. But in a related bit of case law, the landmark Honeywell v. Sperry Rand U.S. federal court case was concluded in April 1973. The 1964 patent for the ENIAC, the world's first general-purpose electronic digital computer, was found both invalid and unenforceable for a variety of reasons thus putting the invention of the electronic digital computer into the public domain. However, IBM was ruled to have created a monopoly via its 1956 patent-sharing agreement with Sperry-Rand.
American antitrust laws did not affect IBM in Europe, where as of 1971 it had fewer competitors and more than 50% market share in almost every country. Customers preferred IBM because it was, as Datamation said, "the only truly international computer company", able to serve clients almost anywhere. Rivals such as ICL, CII, and Siemens began to cooperate to preserve a European computer industry.
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President of IBM John R. Opel became CEO in 1981. IBM was one of the world's largest companies and had a 62% share of the mainframe computer market that year. While frequently relocated employees and families still joked that IBM stood for "I've Been Moved", and employees of acquisitions feared that formal IBM employees would change the culture of their more casual offices, IBM no longer required white shirts for male employees, who still wore conservative suits when meeting customers. Former employees such as Gene Amdahl used their training to found and lead many competitors and suppliers.
Expecting Japanese competition, IBM in the late 1970s began investing in manufacturing to lower costs, offering volume discounts and lower prices to large customers, and introducing new products more frequently. The company also sometimes used non-IBM components in products, and sometimes resold others' products as its own. In 1980 it introduced its first computer terminal compatible with non-IBM equipment, and Displaywriter was the first new product less expensive than the competition. IBM's share of the overall computer market, however, declined from 60% in 1970 to 32% in 1980. Perhaps distracted by the long-running antitrust lawsuit, the "Colossus of Armonk" missed the fast-growing minicomputer market during the 1970s, and was behind rivals such as Wang, Hewlett-Packard (HP), Digital Equipment Corporation, Tandem Computers, and Control Data in other areas.
In 1979 BusinessWeek asked, "Is IBM just another stodgy, mature company?" By 1981 its stock price had declined by 22%. IBM's earnings for the first half of the year grew by 5.3% – one third of the inflation rate – while those of minicomputer maker Digital Equipment Corporation (DEC) grew by more than 35%. Although IBM began selling minicomputers, in January 1982 the Justice Department ended the antitrust suit because, The New York Times reported, the government "recognized what computer experts and securities analysts had long since concluded: I.B.M. no longer dominates the computer business".
IBM wished to avoid the same outcome with the new personal computer industry. The company studied the market for years and, as with UNIVAC, others like Apple Computer entered it first; IBM did not want a product with a rival's logo on corporate customers' desks. The company opened its first retail store in November 1980, and a team in the Boca Raton, Florida office built the IBM PC using commercial off-the-shelf components. The new computer debuted on August 12, 1981 from the Entry Systems Division led by Don Estridge. IBM immediately became more of a presence in the consumer marketplace, thanks to the memorable Little Tramp advertising campaign. Though not a spectacular machine by technological standards of the day, the IBM PC brought together all of the most desirable features of a computer into one small machine. It had 128 kilobytes of memory (expandable to 256 kilobytes), one or two floppy disks and an optional color monitor. And it had the prestige of the IBM brand. Although not inexpensive, with a base price of US$1,565 it was affordable for businesses – and many businesses purchased PCs. Reassured by the IBM name, they began buying these microcomputers on their own budgets aimed at numerous applications that corporate computer departments did not, and in many cases could not, accommodate. Typically, these purchases were not by corporate computer departments, as the PC was not seen as a "proper" computer. Purchases were often instigated by middle managers and senior staff who saw the potential – once the revolutionary VisiCalc spreadsheet, the killer app, had been surpassed by a far more powerful and stable product, Lotus 1-2-3.
IBM's dominance of the mainframe market in Europe and the US encouraged existing customers to buy the PC, and vice versa; as sales of what had been an experiment in a new market became a substantial part of IBM's financials, the company found that customers also bought larger IBM computers. Unlike the BUNCH and other rivals IBM quickly adjusted to the retail market, with its own sales force competing with outside retailers for the first time. By 1985 IBM was the world's most profitable industrial company, and its sales of personal computers were larger than that of minicomputers despite having been in the latter market since the early 1970s.
By 1983 industry analyst Gideon Gartner warned that IBM "is creating a dangerous situation for competitors in the marketplace". The company helped others by defining technical standards and creating large new software markets, but the new aggressiveness that began in the late 1970s helped it dominate areas like computer leasing and computer-aided design. Free from the antitrust case, IBM was present in every computer market other than supercomputers, and entered communications by purchasing Rolm – the first acquisition in 18 years – and 18% of MCI. The company was so important to component suppliers that it urged them to diversify. When IBM (61% of revenue) abruptly reduced orders from Miniscribe shares of not only Miniscribe but that of uninvolved companies that sold to IBM fell, as investors feared their vulnerability. IBM was also vulnerable when suppliers could not fulfill orders; customers and dealers also feared becoming overdependent.
The IBM PC AT's 1984 debut startled the industry. Rivals admitted that they did not expect the low price of the sophisticated product. IBM's attack on every area of the computer industry and entry into communications caused competitors, analysts, and the press to speculate that it would again be sued for antitrust. Datamation and others said that the company's continued growth might hurt the United States, by suppressing startups with new technology. Gartner Group estimated in 1985 that of the 100 largest data-processing companies, IBM had 41% of all revenue and 69% of profit. Its computer revenue was about nine times that of second-place DEC, and larger than that of IBM's six largest Japanese competitors combined. The 22% profit margin was three times the 6.7% average for the other 99 companies. Competitors complained to Congress, ADAPSO discussed the company with the Justice Department, and European governments worried about IBM's influence but feared affecting its more than 100,000 employees there at 19 facilities.
However, the company soon lost its lead in both PC hardware and software, thanks in part to its unprecedented (for IBM) decision to contract PC components to outside companies like Microsoft and Intel. Up to this point in its history, IBM relied on a vertically integrated strategy, building most key components of its systems itself, including processors, operating systems, peripherals, databases and the like. In an attempt to accelerate the time-to-market for the PC, IBM chose not to build a proprietary operating system and microprocessor. Instead, it sourced these vital components from Microsoft and Intel respectively. Ironically, in a decade which marked the end of IBM's monopoly, it was this fateful decision by IBM that passed the sources of its monopolistic power (operating system and processor architecture) to Microsoft and Intel, paving the way for rise of PC compatibles and the creation of hundreds of billions of dollars of market value outside of IBM.
John Akers became IBM's CEO in 1985. During the 1980s, IBM's investment in building its research organization produced four Nobel Prize winners in physics, achieving breakthroughs in mathematics, memory storage and telecommunications, and expanded computing capabilities. In 1980, IBM researcher John Cocke introduced Reduced Instruction Set Computing (RISC). Cocke received both the National Medal of Technology and the National Medal of Science for his innovation, but IBM itself failed to recognize the importance of RISC, and lost the lead in RISC technology to Sun Microsystems.
In 1984 the company partnered with Sears to develop a pioneering online home banking and shopping service for home PCs that launched in 1988 as Prodigy. Despite a strong reputation and anticipating many of the features, functions, and technology that characterize the online experience of today, the venture was plagued by overly conservative management decisions, and was eventually sold in the mid-1990s.
The IBM token-ring local area network, introduced in 1985, permitted personal computer users to exchange information and share printers and files within a building or complex. In 1988, IBM partnered with the University of Michigan and MCI Communications to create the National Science Foundation Network (NSFNet), an important step in the creation of the Internet. But within five years the company backed away from this early lead in Internet protocols and router technologies in order to support its existing SNA revenue stream, thereby missing a boom market of the 1990s. Still, IBM investments and advances in microprocessors, disk drives, network technologies, software applications, and online commerce in the 1980s set the stage for the emergence of the connected world in the 1990s.
However, by the end of the decade, IBM was in trouble. It was a bloated organization of some 400,000 employees that was heavily invested in too any low margin, transactional, commodity businesses. Technologies IBM invented and or commercialized – DRAM, hard disk drives, the PC, electric typewriters – were starting to erode. The company had a massive international organization characterized by redundant processes and functions – its cost structure couldn't compete with smaller, less diversified competitors. Additionally, the back-to-back revolutions – the PC and the client-server – combined to undermine IBM's core mainframe business. The PC revolution placed computers directly in the hands of millions of people. It was followed by the client/server revolution, which sought to link PCs (the "clients") with larger computers that labored in the background (the "servers" that served data and applications to client machines). Both revolutions transformed the way customers viewed, used and bought technology. And both fundamentally rocked IBM and its mainframe competitors. Businesses' purchasing decisions were put in the hands of individuals and departments – not the places where IBM had long-standing customer relationships. Piece-part technologies took precedence over integrated solutions. The focus was on the desktop and personal productivity, not on business applications across the enterprise. As a result, earnings – which had been at or above US$5 billion since the early 1980s, dropped by more than a third to US$3 billion in 1989. A brief spike in earnings in 1990 did not last as corporate spending continued to shift from high-profit margin mainframes to lower margin microprocessor-based systems. In addition, corporate downsizing was in full swing.
Radical changes were considered and implemented. As IBM assessed the situation, it was clear that competition and innovation in the computer industry were now taking place along segmented, versus vertically integrated lines, where computer industry leaders emerged in their respective domains. Examples included Intel in microprocessors, Microsoft in desktop software, Novell in networking, HP in printers, Seagate in disk drives and Oracle Corporation in database software. IBM's dominance in personal computers was challenged by the likes of Compaq and later Dell. Recognizing this trend, management, with the support of the Board of Directors, began to implement a plan to split IBM into increasingly autonomous business units (e.g. processors, storage, software, services, printers, etc.) to compete more effectively with competitors that were more focused and nimble and had lower cost structures.
IBM also began shedding businesses that it felt were no longer core. It sold its typewriter, keyboard, and printer business – the organization that created the popular "Selectric" typewriter with its floating "golf ball" type element in the 1960s – to the investment firm of Clayton, Dubilier & Rice Inc. and became an independent company, Lexmark Inc. In September 1992, IBM combined and spun off their various non-mainframe and non-midrange, personal computer manufacturing divisions into an autonomous wholly owned subsidiary known as the IBM Personal Computer Company (IBM PC Co.). This corporate restructuring came after IBM reported a sharp drop in profit margins during the second quarter of fiscal year 1992; market analysts attributed the drop to a fierce price war in the personal computer market over the summer of 1992. The corporate restructuring was one of the largest and most expensive in history up to that point. By the summer of 1993, the IBM PC Co. had divided into multiple business units itself, including Ambra Computer Corporation and the IBM Power Personal Systems Group, the former an attempt to design and market "clone" computers of IBM's own architecture and the latter responsible for IBM's PowerPC-based workstations.
These efforts failed to halt the slide. A decade of steady acceptance and widening corporate growth of local area networking technology, a trend headed by Novell Inc. and other vendors, and its logical counterpart, the ensuing decline of mainframe sales, brought about a wake-up call for IBM. After two consecutive years of reporting losses in excess of $1 billion, on January 19, 1993, IBM announced a US$8.10 billion loss for the 1992 financial year, which was then the largest single-year corporate loss in U.S. history. All told, between 1991 and 1993, the company posted net losses of nearly $16 billion. IBM's three-decade-long Golden Age, triggered by Watson Jr. in the 1950s, was over. The computer industry now viewed IBM as no longer relevant, an organizational dinosaur. And hundreds of thousands of IBMers lost their jobs, including CEO John Akers.
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In April 1993, IBM hired Louis V. Gerstner Jr. as its new CEO. For the first time since 1914 IBM had recruited a leader from outside its ranks. Gerstner had been chairman and CEO of RJR Nabisco for four years, and had previously spent 11 years as a top executive at American Express. Gerstner brought with him a customer-oriented sensibility and the strategic-thinking expertise that he had honed through years as a management consultant at McKinsey & Co. Recognizing that his first priority was to stabilize the company, he adopted a triage mindset and took quick action. His early decisions included recommitting to the mainframe, selling the Federal Systems Division to Loral in order to replenish the company's cash coffers, continuing to shrink the workforce (reaching a low of 220,000 employees in 1994), and driving significant cost reductions within the company. Most importantly, Gerstner decided to reverse the move to spin off IBM business units into separate companies. He recognized that one of IBM's strengths was its ability to provide integrated solutions for customers – more than piece parts or components. Splitting the company would have destroyed that IBM advantage.
These initial steps worked. In 1994 IBM turned a profit of $3 billion. Stabilization was not Gerstner's endgame – the restoration of IBM's once great reputation was. To do that, he needed a winning business strategy. Over the next decade, Gerstner shed commodity businesses and focused on high-margin opportunities. IBM divested itself of low margin industries (DRAM, IBM Network, personal printers, and hard drives).
By building upon the decision to keep the company whole, IBM built a global services business and a reputation as a technology integrator. IBM claimed that the services business became brand agnostic integrating whatever technologies the client required, even if they were from an IBM competitor. IBM augmented this services business with the 2002 acquisition of the consultancy division of PricewaterhouseCoopers for $3.5 billion US.
Another high margin opportunity IBM invested in was software. Starting in 1995 with its acquisition of Lotus Development Corp., IBM built its software portfolio from one brand, IBM DB2, to five: DB2, Lotus, WebSphere, Tivoli, and Rational. Content to leave the consumer applications business to other firms, IBM's software strategy focused on middleware – the vital software that connects operating systems to applications. The middleware business played to IBM's strengths, and its higher margins improved the company's bottom line significantly as the century came to an end.
Not all software that IBM developed was successful. While the operating system OS/2 was arguably technically superior to Microsoft Windows 95, OS/2 sales were largely concentrated in networked computing used by corporate professionals. OS/2 failed to develop much penetration in the consumer and stand-alone desktop PC segments. There were reports that it could not be installed properly on IBM's own Aptiva series of home PCs.
Microsoft made an offer in 1994 where if IBM ended development of OS/2 completely, then it would receive the same terms as Compaq for a license of Windows 95. IBM refused and instead went with an "IBM First" strategy of promoting OS/2 Warp and disparaging Windows, as IBM aimed to drive sales of its own software and hardware. By 1995, Windows 95 negotiations between IBM and Microsoft, which were difficult, stalled when IBM purchased Lotus Development whose Lotus SmartSuite would have directly competed with Microsoft Office. As a result, IBM received their license later than their competitors which hurt sales of IBM PCs. IBM officials later conceded that OS/2 would not have been a viable operating system to keep them in the PC business.
While IBM hardware and technologies were relatively de-emphasized in Gerstner's three-legged business model, they were not relegated to secondary status. The company brought its research organization to bear more closely on its existing product lines and development processes. While Internet applications and deep computing overtook client servers as key business technology priorities, mainframes returned to relevance. IBM reinvigorated their mainframe line with CMOS technologies, which made them among the most powerful and cost-efficient in the marketplace. Investments in microelectronics research and manufacturing made IBM a world leader in specialized, high margin chip production – it developed 200 mm wafer processes in 1992, and 300 mm wafers within the decade. IBM-designed chips were used in PlayStation 3, Xbox 360, and Wii game consoles. IBM also regained the lead in supercomputing with high-end machines based upon scalable parallel processor technology.
Equally significant in IBM's revival was its reentry into the popular mindset. On October 5, 1992, at the COMDEX computer expo, IBM announced the first ThinkPad laptop computer, the 700C. The ThinkPad, a premium machine which then cost US$4350, included a 25 MHz Intel 80486SL processor, a 10.4-inch active matrix display, removable 120 MB hard drive, 4 MB RAM (expandable to 16 MB) and a TrackPoint II pointing device. The design by noted designer Richard Sapper made the Thinkpad successful with the digerati, and the cool factor of the ThinkPad brought back some of the cachet to the IBM brand that was lost in the PC wars of the 1980s. Instrumental to this popular resurgence was the 1997 chess match between IBM's chess-playing computer system Deep Blue and reigning world chess champion Garry Kasparov. Deep Blue's victory was a historic first for a computer over a reigning world champion. Also helping the company reclaim its position as a technology leader was its annual domination of supercomputer rankings and patent leadership statistics. Ironically, a contributor in reviving the company's reputation was the Dot-com bubble collapse in 2000, where many of the edgy technology high flyers of the 1990s failed to survive the downturn. These collapses discredited some of the more fashionable Internet-driven business models that IBM was previously compared against.
Another factor was the company's revival of the IBM brand. The company's marketing during the economic downturn was chaotic, presenting different, sometimes discordant voices in the marketplace. This brand chaos was attributable in part to the company having 70 different advertising agencies in its employ. In 1994, IBM consolidated its advertising in one agency. The result was a coherent, consistent message to the marketplace.
As IBM recovered its financial footing, it sought to redefine the Internet age in ways that played to traditional IBM strengths, couching the discussion in business-centric manners with initiatives like e-commerce and On Demand. It supported open source initiatives, forming ventures with partners and competitors alike.
The company also revamped its philanthropic practices to bring focus on improving K-12 education. It ended its 40-year technology partnership with the International Olympic Committee after a successful engagement at the 2000 Olympic Games in Sydney, Australia. On the human resources front, IBM adopted and integrated diversity principles and practices ahead of the industry. It added sexual orientation to its non-discrimination practices in 1984, in 1995 created executive diversity task forces, and in 1996 offered domestic partner benefits to its employees. The company is listed as among the best places for employees, employees of color, and women to work. And in 1996, the Women in Technology International Hall of Fame inducted three IBM employees as part of its inaugural class of 10 women: Ruth Leach Amonette, the first woman to hold an executive position at IBM; Barbara Grant, PhD, first woman to be named an IBM site general manager; and Linda Sanford, the highest-placed technical woman in IBM. Fran Allen – a software pioneer for her innovative work in compilers over the decades – was inducted in 1997.
In 1998, IBM merged the enterprise-oriented Personal Systems Group of the IBM PC Co. into IBM's own Global Services personal computer consulting and customer service division. The resulting merged business units then became known simply as IBM Personal Systems Group. In 1999, IBM stopped selling their computers at retail outlets after their market share in this sector had fallen considerably behind competitors Compaq and Dell. Immediately afterwards, the IBM PC Co. was dissolved and merged into IBM Personal Systems Group.
Gerstner retired at the end of 2002, and was replaced by long-time IBMer Samuel J. Palmisano.
In 2005, the company sold all of its personal computer business to Chinese technology company Lenovo and, in 2009, it acquired software company SPSS Inc. Later in 2009, IBM's Blue Gene supercomputing program was awarded the National Medal of Technology and Innovation by U.S. President Barack Obama. In 2011, IBM gained worldwide attention for its artificial intelligence program Watson, which was exhibited on Jeopardy! where it won against game-show champions Ken Jennings and Brad Rutter. The company also celebrated its 100th anniversary in the same year on June 16. In 2012, IBM announced it had agreed to buy Kenexa and Texas Memory Systems, and a year later it also acquired SoftLayer Technologies, a web hosting service, in a deal worth around $2 billion. Also that year, the company designed a video surveillance system for Davao City.
In 2014, IBM announced it would sell its x86 server division to Lenovo for $2.1 billion.[better source needed] while continuing to offer Power ISA-based servers.
The 2019 acquisition of Red Hat enabled IBM to change its focus on future platforms, according to IBM Chief Executive Arvind Krishna.
In October 2020, IBM announced it is splitting itself into two public companies. IBM will focus on high-margin cloud computing and artificial intelligence, built on the foundation of the 2019 Red Hat acquisition. The legacy Managed Infrastructure Services unit will be spun off into a new public company Kyndryl to manage clients' IT infrastructure and accounts, and have 4,600 clients in 115 countries, with a backlog of $60 billion.
On January 21, 2022, IBM announced that it would sell Watson Health to the private equity firm Francisco Partners.
This new focus on hybrid cloud, separating IBM from its other business units, will be larger than any of its previous divestitures, and welcomed by investors.
In July 2022, IBM announced the acquisition of Databand, a data observability software developer, for an undisclosed amount. Following the acquisition, Databand employees will join IBM's data and AI division.
In December 2022, it was announced IBM had acquired the Reston-headquartered digital transformation and IT modernization services provider, Octo Consulting from Arlington Capital Partners for an undisclosed price. IBM also signed a partnership with new Japanese 2 nm process manufacturing company Rapidus.
IBM dominated the electronic data processing market for most of the 20th century, initially controlling over 70 percent of the punch card and tabulating machine market and then achieving a similar share in the computer market. IBM asserted that its successes in achieving and maintaining such market share were due to its skill, industry and foresight; governments and competitors asserted that the maintenance of such large shares was at least in part due to anti-competitive acts such as unfair prices, terms and conditions, tying, product manipulations and creating FUD (Fear, Uncertainty and Doubt) related to its competitors,in the marketplace. IBM was thus the defendant in more than twenty government and private antitrust actions during the 20th century. IBM lost only one of these matters but did settle others in ways that profoundly shaped the industry as summarized below. By the end of the 20th century, IBM was no longer so dominant in the computer industry. Some observers suggest management's attention to the many antitrust lawsuits of the 1970s was at least in part responsible for its decline.
In 1932 U.S. Government prosecutors asserted as anti-competition tying IBM's practice of requiring customers who leased its tabulating equipment to purchase punched cards used on such equipment. IBM lost the lawsuit and in the resulting 1936 consent decree, IBM agreed to no longer require only IBM cards and agreed to assist alternative suppliers of cards in starting production facilities that would compete with IBM's; thereby create a separate market for the punched cards and in effect for subsequent computer supplies such as magnetic tapes and disk packs.
On January 21, 1952, the U.S. Government filed a lawsuit which resulted in a consent decree entered as a final judgment on January 25, 1956. The government's goal to increase competition in the data processing industry was effected through several provisions in the decree:
While the decree did little to limit IBM's future dominance of the then-nascent computer industry, it did enable competition in segments such as leasing, services, maintenance, and equipment attachable to IBM systems and reduced barriers to entry through mandatory reasonable patent cross-licensing.
The decree's terms remained in effect until 1996; they were phased out over the next five years.
In 1968 the first of a series of antitrust suits against IBM was filed by Control Data Corp (CDC). It was followed in 1969 by the US government's antitrust complaint, then by 19 private US antitrust complaints and one European complaint. In the end IBM settled a few of these matters but mainly won. The US government's case sustained by four US Presidents and their Attorneys General was dropped as "without merit" in 1982 by William Baxter, US President Reagans' Assistant Attorney General in charge of the Antitrust Division of the U.S. Department of Justice.
CDC filed an antitrust lawsuit against IBM in Minnesota's federal court alleging that IBM had monopolized the market for computers in violation of section 2 of the Sherman Antitrust Act by among other things announcing products it could not deliver. A 1965 internal IBM memo by an IBM attorney noted that Control Data had publicly blamed its declining earnings on IBM, "and its frequent model and price changes. There was some sentiment that the charges were true." In 1973 IBM settled the CDC case for about $80 million in cash and the transfer of assets including the IBM Service Bureau Corporation to CDC.
On January 17, 1969, the United States of America filed a complaint in the United States District Court for the Southern District of New York, alleging that IBM violated Section 2 of the Sherman Antitrust Act by monopolizing or attempting to monopolize the general-purpose electronic digital computer system market, specifically computers designed primarily for business. Subsequently, the US government alleged IBM violated the antitrust laws in IBM's actions directed against leasing companies and plug-compatible peripheral manufacturers.
In June 1969 IBM unbundled its software and services in what many observers believed was in anticipation of and a direct result of the 1969 US Antitrust lawsuit. Overnight a competitive software market was created.
Among the major violations asserted were:
It was in some ways one of the great single firm monopoly cases of all times. IBM produced 30 million pages of materials during discovery; it submitted its executives to a series of pretrial depositions. Trial began six years after the complaint was filed and then it battled in court for another six years. The trial transcript contains over 104,400 pages with thousands of documents placed in the record. It ended on January 8, 1982, when William Baxter, the then Assistant Attorney General in charge of the Antitrust Division of the Department of Justice dropped the case as "without merit."
The U.S.'s 1969 antitrust lawsuit was followed by about 18 private antitrust complaints all but one of which IBM ultimately won. Some notable lawsuits include:
Greyhound, a leasing company, filed a case under Illinois' state antitrust law in Illinois state court. This case went to trial in federal court in 1972 in Arizona with a directed verdict for IBM on the antitrust claims; however, the court of appeals in 1977 reversed the decision. Just before the retrial was to start in January 1981, IBM and Greyhound settled the case for $17.7 million.
Telex, a peripherals equipment manufacturer, filed suit on January 21, 1972, charging that IBM had monopolized and had attempted to monopolize the worldwide manufacture, distribution, sales, and leasing of electronic data processing equipment including the relevant submarket of plug-compatible peripheral devices. After a non-jury trial in 1973, IBM was found guilty "possessing and exercising monopoly power" over the "plug-compatible peripheral equipment market," and ordered to pay triple damages of $352.5‐million and other relief including disclosure of peripheral interface specifications. Separately Telex was found guilty of misappropriated IBM trade secrets. The judgment against IBM was overturned on appeal and on October 4, 1975, both parties announced they were terminating their actions against each other.
Other private lawsuits ultimately won by IBM include California Computer Products Inc., Memorex Corp., Marshall Industries, Hudson General Corp., Transamerica Corporation and Forro Precision, Inc.
The European Economic Community Commission on Monopolies initiated proceedings against IBM under article 86 of the Treaty of Rome for exploiting its domination of the continent's computer business and abusing its dominant market position by engaging in business practices designed to protect its position against plug-compatible manufacturers. The case was settled in 1984 with IBM agreeing to change its business practices with regard to disclosure of device interface information.
See List of IBM products
The story of IBM's hardware is intertwined with the story of the computer industry – from vacuum tubes, to transistors, to integrated circuits, to microprocessors and beyond. The following systems and series represent key steps:
Main article: History of IBM mainframe operating systems
IBM operating systems have paralleled hardware development. On early systems, operating systems represented a relatively modest level of investment, and were essentially viewed as an adjunct to the hardware. By the time of the System/360, however, operating systems had assumed a much larger role, in terms of cost, complexity, importance, and risk.
Mainframe operating systems include:
Other significant operating systems include:
Early IBM computer systems, like those from many other vendors, were programmed using assembly language. Computer science efforts through the 1950s and early 1960s led to the development of many new high-level languages (HLL) for programming. IBM played a complicated role in this process. Hardware vendors were naturally concerned about the implications of portable languages that would allow customers to pick and choose among vendors without compatibility problems. IBM, in particular, helped create barriers that tended to lock customers into a single platform.
Nevertheless, IBM had a significant role in the following major computer languages:
IBM developed an inconsistent relationship with the UNIX and Linux worlds. The importance of IBM's large computer business placed pressures on all of IBM's attempts to develop other lines of business. All IBM projects faced the risk of being seen as competing against company priorities. This was because, for example, if a customer decided to build an application on an RS/6000 platform, this also meant that a decision had been made against the highly profitable and entrenched mainframe platform. So despite having some excellent technology, IBM often placed itself in a compromised position.
A case in point is IBM's GFIS products for infrastructure management and GIS applications. Despite long having a dominant position in such industries as electric, gas, and water utilities, IBM stumbled in the 1990s trying to build workstation-based solutions to replace its existing mainframe-based products. Some customers moved to new technologies from other vendors; many felt betrayed by IBM.
While IBM better embraced open source technologies in the 1990s, it later became embroiled in a complex litigation with SCO group over intellectual property rights related to the UNIX and Linux platforms.
1983 saw the announcement of the System/36, the replacement for the System/34. And in 1988, IBM announced the AS/400, intended to represent a point of convergence for both System/36 customers and System/38 customers. The 1970s had seen IBM develop a range of Billing, Inventory Control, Accounts Receivable, and Sales Analysis (BICARSA ) applications for specific industries: construction (CMAS), distribution (DMAS), and manufacturing (MMAS), all written in the RPG II language. By the end of the 1980s, IBM had almost completely withdrawn from the BICARSA applications marketplace. Because of developments in the antitrust cases against IBM brought by the US government and European Union, IBM sales representatives were now able to work openly with application software houses as partners. (For a period in the early 1980s, a 'rule of three' operated, which obliged IBM sales representatives, if they were to propose a third-party application to a customer, to also list at least two other third-party vendors in the IBM proposal.)
IBM has largely been known for its overtaking UNIVAC's early 1950s public fame, then leading in the computer industry for much of the latter part of the century. However, it has also had roles, some significant, in other industries, including:
For IBM's corporate biographies of former CEOs and many others see: IBM Archives Biographies Builders reference room
Main article: IBM Global Services
Main article: IBM Research
See also History of IBM research in Israel
A significant part of IBM's operations were FSD's contracts with the U.S. Federal Government for projects ranging from the Department of Defense to the National Security Agency. These projects spanned mundane administrative processing to top-secret supercomputing. In NASA's Apollo Program, the "brains" of each Saturn rocket was the Instrument Unit built by the IBM Space Systems Center in Huntsville, Alabama. Founded in 1957, FSD was sold to Loral in 1994. Among other Federal Systems Division projects was the digitization of the New York Times Morgue (previously published papers) and the New York Times Index which had previously been published annually in print. The project was led by Harlan Mills. The project was notable for delivering the project on time and on budget due to Mill's development of "top down" design and chief programmer teams.
Main article: International subsidiaries of IBM
IBM had subsidiaries and operations in 70 countries in its early years. They included Austria, Belgium, Bulgaria, Czechoslovakia, France, Germany, Italy, Japan, the Netherlands, Norway, Poland, Romania, the Soviet Union, Sweden, Switzerland, Yugoslavia, and others.
IBM's early dominance of the computer industry was in part due to its strong professional services activities. IBM's advantage in building software for its own computers eventually was seen as monopolistic, leading to antitrust proceedings. As a result, a complex, artificial "arms-length" relationship was created separating IBM's computer business from its service organizations. This situation persisted for decades. An example was IBM Global Services, a services firm that competed with Electronic Data Systems and Computer Sciences Corporation, among others.
Rather than offer hardware, services and software exclusively in packages, marketers "unbundled" the components and offered them for sale individually. Unbundling gave birth to the multibillion-dollar software and services industries, of which IBM is today a world leader
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IBM's skill, industry, and foresight, the judge pointed out, resulted in "a sophisticated, refined, highly organized, and methodologically processed" campaign to restrict the operations of many competitors.
With software either custom made or given away free, there was a limited commercial market for it. At least, not until a lawsuit against IBM changed the game.
The jury was deadlocked 9 to 2 in favor of Memorex.
For more recent IBM subject books see: IBM#Further reading
For Punched card history, technology, see: Unit record equipment#Further reading
For Herman Hollerith see: Herman Hollerith#Further reading
For IBM's corporate biographies of former CEOs and many others see: IBM Archives Biographies Builders reference room