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IBM was founded in 1911. For decades it stayed on top of the data processing game, up to when people starting wanting smaller, cheaper PCs.

Tech fortunes can turn with time & innovation Just compare the market cap paths of IBM & Microsoft

IBM was founded in 1911. For decades it stayed on top of the data processing game, up to when people starting wanting smaller, cheaper PCs. During 1974-1984, mainframes? market share fell from around 80% to less than 30%. IBM set up huge, expensive factories to build PCs but turned to Microsoft (established in 1975) to develop an operating system. In 1993, Microsoft overtook IBM in market cap. David had felled Goliath, who just couldn?t move fast enough for fast-changing times. Then IBM got a new boss, Lou Gerstner, whose war cry was, give customers solutions rather than individual hardware or software. Someone wrote this shift was akin to GM giving up cars for traffic-guidance systems. But Gerstner made it work. And he handed over a healthier company to Sam Palmisano who took over in 2002. Palmisano kept the engine well-oiled and even added momentum. The global services unit that Gerstner had introduced now accounts for around 50% of the company?s revenues. If Gerstner had ditched the browser, Palmisano sold the PC hardware division to China?s Lenovo. Risks were taken. Risks have been rewarded. IBM has again overtaken Microsoft.

By contrast with Palmisano, Steve Ballmer?s 11 years at the helm of Microsoft leave a lot to be desired. Stock values have been stagnant. Company direction is unclear. Apple is crushing it. It?s playing catch-up with smartphones and social media. Instead of innovating a Skype, it?s buying one at a sky-high price. David has become Goliath, gigantic but stodgy.

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First published on: 26-05-2011 at 03:10 IST
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