IBM's Struggles

Posted on November 06, 2014 By Henry Newman


For those of you old enough to remember, the 1980s and early 1990s was a bad period for IBM, especially the late 1980s and early 1990s. With the advent of smaller computers from DEC, Sun, and others, there was a paradigm shift that IBM was not ready for. Their revenue plunged and the stock followed, of course. 

The anchor at that time was their mainframe business, and that business was in serious trouble. In the 1980s IBM had tried to embrace supercomputing by adding vector processors to their mainframe design and it failed miserably. IBM made lots of bad moves with lots of money spent and little to nothing to show for it. 

Fast forward to 2014 and they are in a similar business situation for, in my opinion, exactly the same reasons. IBM seems to have lost an understanding of market dynamics. They have sold off the basic infrastructure technologies from disk drives to chips because they were not profitable enough, no different than the steel industry, sticking to the high profit parts of their business in the 1960-1980s – and look where that got them.

There have been many books writing about that poor set of decisions. IBM followed the same path with the same results. Honestly we have seen this in our industry decade after decade and ours is not the only industry to follow this path. 

So what happens, in my opinion? In 1993 the IBM board finally got a clue and picked a visionary leader and clearly an amazing manger, Louis Gerstner, Jr.  IBM is in the same position, about to become marginalized in the industry.  Funny that Mr. Gerstner left the CEO position in March of 2002 and IBM sold the disk drive division to Hitachi in December of the same year, or is it sad?  IBM in my opinion has one shot to get a CEO with the same qualities for our period for, without it, their future in my opinion, is pretty bleak. 

Photo courtesy of Shutterstock.

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