Management Mistakes and Successes, Tenth Edition

Chapter 6. IBM: A Fading Giant Rejuvenates

Like Continental Air, IBM seemed to be on a roller-coaster, with the major difference that it was so much bigger and had so many years of industry domination. The common notion is that the bigger the firm, the more difficult to turn it around, just as a giant ocean liner needs far more room to maneuver to avoid catastrophe than a smaller vessel.

THE REALITY AND THE FLAWED ILLUSION

On January 19, 1993, International Business Machines Corporation reported a record $5.46 billion loss for the fourth quarter of 1992, and a deficit for the entire year of $4.97 billion, the biggest annual loss in American corporate history. (General Motors recorded a 1991 loss of $4.45 billion, after huge charges for cutbacks and plant closings. And Ford Motor Company reported a net loss of more than $6 billion for 1992, but that was a non-cash charge to account for the future costs of retiree benefits.) The human cost, as far as employment was concerned, was also consequential; some 42,900 had been laid off in 1992, with an additional 25,000 planned to go in 1993. In its fifth restructuring since 1985, seemingly endless rounds of job cuts and firings had eliminated 100,000 jobs in less than a decade. Not surprisingly, IBM's share price, which was above $100 in the summer of 1992, closed at an 11-year low of $48.375. Yet IBM had long been the ultimate blue-chip company, reigning supreme in the computer industry. How could its problems have surfaced so suddenly and ...