IBM is marking the 100th anniversary of its incorporation. And far from being a relic, IBM seems to have caught its stride once again in the last decades. Take a look at the company's market capitalisation compared to its young competitors in the tech sector (from The Economist ): It is a remarkable feat for any company, but especially so for a high tech company. IBM operates in a field where the basic foundation of business products changes rapidly. But, as The Economist details, the company has survived by doing what so many companies across a variety of fields fail to do. Its business was based on punch cards, but it did not allow itself to become a dinosaur when punch cards started to fade in favor of the early calculating machines. As leadership of the company passed from Thomas Watson, Sr., to Thomas Watson, Jr., IBM became the global leader in computing. From The Economist: Under the younger Watson, IBM became by far the world’s biggest computer-maker. He did the trick by betting the company on the System/360, IBM’s first family of mainframe computers, which took years and $5 billion (in 1960s dollars)—more than the Manhattan Project that led to the atomic bomb—to develop. Launched in 1964, the System/360 became the first dominant computing platform, mainly because all the family’s machines, big or small, were “compatible”, meaning they could run the same software. By 1969 IBM’s market share had grown to 70%. It thus became the first IT company to be called an “evil empire” and aroused the ire of America’s antitrust authorities. The Reagan administration eventually dropped the case in 1982, asserting that it had been “without merit”. The second platform shift—from costly mainframes to “distributed” computing systems, including PCs—was a much closer shave. Even while the antitrust case was dragging on, technological progress had begun to undermine IBM’s near-monopoly and, more importantly, its business model of renting its expensive machines to customers. Since this was highly profitable, IBM was very slow to deliver cheaper and distributed computing systems, made possible by new processors. When these systems took off in the early 1990s, IBM’s business collapsed. Mainframe revenues dropped from $13 billion in 1990 to $7 billion in 1993 and losses of $16 billion piled up. “Only a handful of people understand how precariously close IBM came to running out of cash,” wrote Lou Gerstner, who was brought in to turn the company around, in “Who Says Elephants Can’t Dance?”, his book about the revival. He fired 35,000 employees to cut costs. The lesson of the story appears to be that companies that develop a strong sense of what the company is rather than being simply a vehicle for a certain product or certain type of product stands a better chance at long term success. Read IBM: 1100100 and counting here .
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