IBM in Perspective
IBM may be down, but it's not out. The computermaker still produces and sells more than all other US high-tech firms put together. Some of its products are doing well, its staff still includes many brilliant engineers, and its financial resources are considerable. But, like other giants of American industry, IBM may have lost its ability to dominate a whole field of enterprise.
Critics point out that the company once prided itself on holding a top position in all facets of the computer market. Its chief competitors were thought to be overseas, especially in Japan. But, in the end, it was smaller companies in the United States - like Intel, Sun Systems, and Microsoft - that carved out profitable niches and nudged "Big Blue" to the periphery.
In the personal computer realm, particularly, IBM lagged. The company's biggest profits had always been in large, mainframe machines, and it continued to push those products even as the market shifted toward desktop units that were both more agile than and as powerful as the larger computers. IBM is hustling to catch up now, and its PC line includes some popular items. The road ahead, however, will be difficult.
The degree of difficulty was shown by IBM's announcements last week - possibly its first-ever forced layoffs, a $1 billion reduction in research, a 1992 profit picture that shocked investors.
IBM executives talk of a devolution of power within the corporation, with pieces of the business, like the PC branch, gaining independence. But the greatest need may be an honest assessment of the firm's greatest strengths and a determination to build on those, letting other product lines fall away.
When companies like IBM - or General Motors, or Sears - are shaken, the whole country feels a jolt. Concerns about industrial decline are rekindled. It's worth remembering that it has happened before, when the railroads, or Big Steel, collapsed.
Lots of people who thought their working lives were secure are put out of work. A still-vigorous and competitive US high-tech sector will absorb some of them, but there's no doubt IBM's dark news gives Bill Clinton's promise to "grow the economy" even more urgency.