Chapter 9 The IBM Corporation
9.1 ... Introduction
Prior to the introduction of the PC computer, IBM
was in a state of transition. The US Federal Government
Department of Justice was ending a long period of
litigation into IBM's monopolistic and anti-competitive
practices. Although IBM would be successful in its
defense of the governments charges, it had caused
problems for the corporation. A moderation in marketing
and product line expansion had occurred during this
sensitive period of litigation. This resulted in a loss
of market share for IBM. This was also the period during
which Thomas J. Watson Jr., relinguished his role as the
head of IBM. The end of a family dynasty. During this
time various organizational changes were evaluated. One
of the areas of concern was the size of the organization
and the effects of the bureaucracy on new initiatives .
Conseguently the concept of the Independent Business
Units (IBU's) was conceived. Frank T. Cary, the IBM
chairman and chief executive officer was guoted as
saying that the IBU's "might even teach an elephant
(IBM) how to tap dance."
The Entry Level Systems (ELS) unit in Boca Raton,
Florida had responsibility for the low cost end of IBM's
computer business . It was this division that introduced
the unsuccessful IBM 5100 portable computer in September
1975. William C. Lowe was the manager of IBM's Entry
Level Systems Unit and was promoted to overall
laboratory director in 1978 .
It was during the period of 1975 to 1979 that the
microcomputer market exploded. It started with the
release of the Altair 8800 in January 1975, Commodore
Pet in 1976, the Apple II and Tandy Radio Shack TRS-80
microcomputers in 1977. The microcomputers of the 1970 ' s
were oriented to the hobbyist type of user. The
"hackers" got satisfaction and were indeed fascinated by
either the electronic or software complexity of building
and operating their own computer. During the late 1970 ' s
several microcomputer software releases were laying the
9/2 Part III 1980's~ The IBM/Macintosh era
foundation for the utilization of microcomputers by
business. Those were the word processing program Word-
Master in 1978, the Vulcan database in 1979 and of great
significance, the financial spreadsheet program VisiCalc
in 1979. However at this point in time the business
market had not been penetrated to any extent.
The dynamic growth of the microcomputer industry
during the late 1970 ' s had not gone unnoticed at IBM. It
was recognized by both corporate management and Lowe who
initiated a detailed analysis. The leading producers of
personal computers in 1979/80 were Apple Computer,
Commodore and Tandy Radio Shack. However they had not
released products that met the reguirements of either
the small or corporate business market. This situation
was prevalent in not only North America, but also in
Europe and Asia. Lowe rationalized that the recognition
of IBM as the major international computer manufacturer
would be a key factor in the commercial acceptance of a
personal computer by their company.
In 1980, IBM released the Model 5120, a desktop
version of the unsuccessful 5100 series of portable
computers. However, this would not be successful either.
During Lowe's analysis of IBM's possible entry
into the personal computer market a number of concerns
were identified. The majority of microcomputer
developments had been by small entrepreneurial
companies . Indeed a number of them such as Apple had
been started in a garage. This of course was the
opposite extreme from IBM with its extensive
bureaucracy. The corporation also tended to engineer all
of its components and software in house. This would
result in higher than reguired guality levels that would
escalate costs and delay development. Another
significant factor was that IBM did not at that time
have a microprocessor or the technology. Conseguently to
compete in the personal computer market would reguire
significant changes at IBM. An organization with greater
entrepreneurial type of freedom for development,
production and marketing was essential.
The IBM Corporation 9/3
Fig. 9.1: William C. Lowe. Fig. 9.2: Philip D. Estridge.
Figure 9.3: IBM Personal Computer.
Photographs are courtesy of International Business
9/4 Part III 1980's~ The IBM/Macintosh era
9.2 ... PC Approval and Development
In 1980, John R. Opel was the president of IBM,
and all major projects required the approval of the
Corporate Management Committee (CMC) at headquarters in
Armonk, New York. In July, William Lowe presented to the
CMC a personal computer market analysis, his concerns
for the product development internally at IBM and two
proposals for CMC consideration. One proposal was for
IBM to either buy a personal computer company or a
personal computer design, such as that from Atari. The
second proposal was for IBM to design and build a new
personal computer, but to do it outside of the normal
corporate structure. To complete this proposal, he
requested authorization to assemble a small task force
of hand-picked engineers . This group would produce a
prototype within thirty days for demonstration to the
CMC. Shortly after, the approval to proceed with the new
computer proposal was given. Corporate management was
anxious to enter the desktop market, the timing had been
Funding was granted for twelve engineers to
develop the prototype and the detailed commercial
proposals . The first person Lowe recruited was Bill
Sydnes as manager for the engineering design. Sydnes had
been manager of the IBM 5120 desktop computer which had
not been a commercial success, but had been developed
and produced on time. Lewis Eggebrecht was a principal
in the systems engineering design and Joe Bauman was
selected to develop the business and manufacturing
plans. The rest of the task force was quickly selected.
Another member of the founding group was Jack Sams who
was in charge of software development. Sydnes and Sams
had both been involved in a recent System/23 DataMaster
business computer project. This project was delayed by
nearly a year due to internal development of the BASIC
interpreter. This resulted in the decision to use
existing software from outside suppliers. Sams was
involved in the initial selection and discussions with
Microsoft as a major supplier for software in late July.
The IBM Corporation 9/5
The thirty day period to develop and present a
prototype to the CMC required that a number of critical
decisions be made very quickly by the task force. Some
of those were the concept of an open bus architecture, a
16-bit microprocessor, components and peripherals from
competitive sources, a software operating system from
outside IBM and marketing separate from IBM's sales
organization. Maximizing the capabilities of the new
computer without affecting the market for IBM's other
low end computers required consideration.
In early August Lowe demonstrated the prototype
and presented his recommendations for IBM to enter the
personal computer market to the Corporate Management
Committee. The presentation was a success and the CMC
gave approval to form a Product Development Group for
the new computer. This group would become one of IBM's
Independent Business Units. To maintain confidentiality,
code names were assigned to the group and computer. The
new group would be known as project "Chess" and the
computer as the "Acorn" . The timetable required an
additional review by the CMC in mid October and the
computer to be shipped within one year. The next
critical selection for Lowe was a manager for the new
group. Lowe had aspirations for higher corporate levels
and selected Philip D. Estridge to be the manager of
Project Chess in early September.
Don Estridge quickly doubled the engineering
staff to twenty six. The final design time frame was
extremely short. All of the components had to be state-
of-the-art, but be existing and proven in the market.
This resulted in a design that was not leading edge, but
a conservative product for commercial production and
customer acceptance. Some features such as the bus
architecture and the keyboard evolved from the IBM
System 23 DataMaster computer. David J. Bradley, who had
worked on the System/23 DataMaster project, was assigned
to develop the control code for the Basic Input/Output
System (BIOS) . Fully functional prototypes had to be
assembled for internal development and outside suppliers
of peripherals and software.
By late August IBM was planning for Microsoft
Corporation to provide the programming languages .
9/6 Part III 1980's~ The IBM/Macintosh era
However the task force was having a problem obtaining a
16-bit version of the popular CP/M operating system from
Digital Research, Inc. Then in late September Microsoft
made a proposal to supply the operating system (see
Section 12.2) and the programming languages. After CMC's
final approval of the Chess computer project in October,
IBM accepted the Microsoft proposals and a contract was
signed in November. IBM also contracted with other
software suppliers such as Personal Software to adapt
VisiCalc for the new computer.
Other IBM executives were selected to participate
in the project and made significant contributions. H. L.
Sparks headed marketing and sales, Joseph Sarubbi
technical procurement, Dan Wilkie manufacturing and
James D'Arezzo communications. D'Arezzo joined the
project as manager of communications in January 1981. In
March, William Lowe left Boca Raton and became a vice
president of the Information Systems Division and
general manager of the plant in Rochester, Minnesota.
Then in June, Joe Bauman joined Lowe and was replaced by
Dan Wilkie as the new director of manufacturing.
D'Arezzo in conjunction with Lord, Geller, Federico and
Einstein, a New York advertising agency used by IBM,
created an advertising campaign based on the Charlie
Chaplin tramp characture. The concept provided a
friendly and uncomplicated user vision for the new
computer introduction that was highly successful. During
this time period the name IBM Personal Computer (IBM PC)
was selected for the computer. The estimate of the
market for the IBM PC was 250,000 units over a five year
period. In late July the CMC gave its final approval for
the introduction of the IBM PC.
9.3... The Original PC
The following are details of the IBM Personal
Computer (IBM PC) that was introduced on August 12, 1981
in New York.
The microprocessor selected was the Intel 8088
operating at 4.77 MHz. Internally the microprocessor
used the 16-bit instruction set of the Intel 8086 with
The IBM Corporation 9/7
an 8-bit external data communication bus. An additional
socket was provided for the later utilization of the
Intel 8087 numeric coprocessor. The memory had 40K bytes
of ROM and 16K bytes of RAM, expandable to 64K on the
system board and to 25 6K by adding memory expansion
cards. The ROM incorporated the 32K Microsoft Cassette
BASIC interpreter and the 8K Basic Input/Output System
(BIOS) . The BIOS chip provided control of information
transfer between elements of the hardware system.
The basic system unit had five 62 pin expansion
slots for additional memory, display, printer,
communication and game adapter cards. One parallel
printer port, one RS-232C serial port and a built in
speaker were standard. A separate 83 key adjustable tilt
keyboard was connected to the computer by a six foot
coiled cable via a serial port. The keyboard
incorporated a numeric key pad, ten special function
keys and indicator lights to display shift states . The
basic system also had an audio cassette recorder
connector for mass storage. With a freguency modulator
an ordinary television set could be used as a monitor.
Two additional types of display were offered. A
monochrome display with a Monochrome Display Adapter
(MDA) for business and a color display with a Color
Graphics Adapter (CGA) for home use.
The IBM Monochrome Display used an 11.5 inch
green-phosphor tube. This monitor reguired the
monochrome adapter card that had 4K bytes of on-board
memory. The monitor could display 25 rows of 8
characters. The MDA system provided for 256 characters
to support major languages and other items such as
The color/graphics monitor adapter enabled
connection to a RGB (red-green-blue) monitor, a color
television or a black and white monitor. The adapter had
16K bytes of on-board memory and could display two modes
of text and three modes of graphics. The first mode of
text was 25 rows of 40 characters for color televisions
and composite monitors. The second text mode was 25 rows
of 80 characters for RGB monitors. The low resolution
graphics mode was 100 rows of 160 pixels with 16 colors,
but was not supported by IBM. The medium resolution
9/8 Part III 1980's~ The IBM/Macintosh era
graphics was 200 rows of 320 pixels with 4 colors. The
high resolution graphics mode was 200 rows of 640 pixels
using a white-on-black image.
The basic unit had provision for two 5.25 inch
floppy disk drives manufactured by the Tandon
Corporation, The disks were 160K byte single-sided,
soft-sectored and double density. The disk operating
system was IBM PC-DOS developed by Microsoft.
The printer was an Epson MX-80 with an IBM label.
The unit printed bi-directionally at 80 characters per
second, with a 9 by 9 dot matrix and a choice of 12 type
Three forms of BASIC were developed by Microsoft
and offered by IBM: Cassette BASIC (standard) , Disk
BASIC and Advanced BASIC, also known as BASICA. Some of
the other software available when the PC computer was
released were: VisiCalc from Personal Software, three
accounting programs from Peachtree Software, EasyWriter
word processor from Information Unlimited Software and
from Microsoft a Pascal compiler and a fantasy-
simulation game called Adventure. IBM also indicated
that they would offer Digital Research's CP/M-86
operating system and SofTech Microsystems UCSD p-System
which included UCSD Pascal. Communications software was
also available to communicate with other computers and
for connection to services such as the Dow Jones
News/Retrieval Service and The Source.
The basic system unit with 16K bytes of RAM and
keyboard sold for $1,565. A system unit with 48K bytes
of RAM, keyboard, single floppy disk drive and disk-
drive adapter card was $2,235. A monochrome video
display was $345 and the printer $755. The combination
monochrome display adapter and printer adapter was $335.
The 16K, 32K and 64K byte memory expansion cards were
$90, $325 and $540 respectively.
A significant marketing decision for IBM was the
use of mass merchandising by major retailers such as
ComputerLand and Sears, Roebuck and Company to sell the
computer. The company also set up a chain of IBM Product
Centers in major cities as retail outlets. Large
corporate accounts were handled by the Data Processing
Division sales force. Another significant decision was
The IBM Corporation 9/9
the publishing of a Technical Reference manual for the
IBM PC that provided details of all the system
specifications. This was done to facilitate the
development of adapter cards and programs by outside
The IBM PC was an outstanding success. IBM had
orders for 30,000 systems from their own US employees on
the announcement day. The only limiting factor on
initial sales was the production capacity. Estridge had
taken a group of 12 people in 1980 to a work force of
9,500 in 1984. Estridge was named division director of
the entry systems business unit in January 1982, and
became a vice president of the new Systems Products
Division and general manager of entry systems in January
1983. By the end of 1983 IBM had sold 750,000 personal
9/10 Part III 1980's~ The IBM/Macintosh era
Figure 9.4: IBM PC/XT Computer.
Figure 9.5: IBM PC AT Computer.
Photographs are courtesy of International Business
The IBM Corporation 9/11
9.4 ... The Following Models
The IBM 9000 Instruments System Computer was
announced in May 1982 and displayed at the June 1982
COMDEX show in Atlantic City. It was developed by a
wholly owned subsidiary IBM Instruments Inc. and
marketed as a laboratory instrumentation computer.
The computer used a Motorola MC68000
microprocessor operating at 8 MHz. The memory had 128K
bytes of ROM and 12 8K bytes of RAM expandable to 5.2
megabytes. The unit used a 32-bit Versabus bus standard
developed by Motorola. An optional expansion board could
accommodate up to five Versabus cards.
The storage system could have up to 4 drives in
any combination of 5.25 or 8-inch sizes. The monitor had
a 12-inch green-on-black screen capable of displaying 30
lines of 80 characters with a 480 by 768 pixel
resolution. The unit had a separate 83-key keyboard, a
57-key user-definable keypad on the main chassis and an
optional 2 00 characters per second in draft mode, four-
color dot-matrix printer. IBM developed the real time,
multitasking Computer System Operating System (CSOS) .
The price varied from $5,695 to over $10,000 depending
on the configuration.
The PC Series
In February 1982, three projects were initiated
that would become the PC AT, PC Junior (PCjr) and the
PC/XT. The PCjr was targeted at the low end of the
market for home consumers. The PC/XT, with the XT
representing extended technology, had a hard disk and
was targeted at the professional business market above
the PC. The PC AT, with the AT representing Advanced
Technology would feature the new Intel 8028 6
microprocessor. IBM assigned the code name of Circus to
the PC AT project.
The Corporate Management Committee (CMC) in
Armonk approved all three projects. Product managers for
each of the projects were selected to administer the
development of the products .
9/12 Part III 1980's~ The IBM/Macintosh era
Personal Computer XT (PC/XT)
The product manager selected to develop the PC/XT
was Joseph Sarubbi. The PC/XT would be the only project
of the three approved in February 1982 to stay on
schedule and be released on time.
IBM introduced the PC/XT model in March 1983 in
New York City. It included hard disk drive technology
but utilized the same microprocessor as the PC. This new
model was evolutionary. There had been expectations that
IBM would utilize either the Intel 8086 or 80186
microprocessors. However once again IBM had taken a
conservative approach to implementation of new
The following are some details of the model. The
microprocessor was the Intel 8088, the same as the IBM
PC computer. Standard memory was 12 8K, expandable to
256K on the mother board and to 640K by adding expansion
cards. The 40K of ROM contained the Microsoft Basic
interpreter and Basic Input Output System (BIOS)
A 10 megabyte Winchester hard-disk drive
manufactured by Seagate was the significant feature of
the standard unit. Also included was a single 5 1/4 inch
floppy disk drive, utilizing 360K byte double-sided,
double-density disks. An asynchronous communications
adapter was standard. The motherboard had eight
expansion slots, as compared to five on the PC computer.
However three slots were used by the communications
adapter, floppy disk drive and hard disk drive adapters.
The audio cassette recorder connector that had been on
the PC was deleted. IBM also released its first RGB
color monitor for both the PC and XT computers.
The cost of the standard unit with 128K of RAM,
keyboard, 10 megabyte hard disk drive, 360K floppy disk
drive and a asynchronous communications adapter card was
$4,995. A monochrome adapter and display was $680. A
color graphics adapter and color display monitor was
$924. The PC XT model was a huge success and became a
workhorse of the business world.
Microsoft made improvements to the operating
system software for the PC/XT release. In addition to
The IBM Corporation 9/13
support for the Winchester hard disk, new features such
as a hierarchical file system with sub directories were
incorporated into version 2.00 of the operating system.
An updated version 2.00 of BASIC was also released that
provided advanced support for communications, graphics
and music. The generic name of this BASIC interpreter
was GWBASIC (Gee Whiz BASIC). The PC-DOS 2.00 operating
system and BASIC 2.00 interpreter cost $60 each.
PC Junior (PCjr)
The product manager selected to develop the PC
Junior in February 1982 was Bill Sydnes . Sydnes wanted
to develop a product for the consumer market that would
be sold by mass merchandisers to compete with the Apple
II computer at a lower price. Although it would have a
somewhat limited capability compared to the PC, its
performance capabilities could be improved by the
purchase of upgrade features. The code name "Peanut"
became associated with the new product. IBM contracted
the manufacture of the computer to Teledyne Inc., in
Tennessee, a company founded by Arthur Rock and Henry
In the summer of 1983, Sydnes resigned from IBM
due to differences of opinion with Don Estridge on
marketing and other aspects of the PC Junior
development. He then joined the Franklin Computer
Corporation as vice president for product development.
The new manager would be Dave O'Connor. However,
O'Connor had inherited design and production problems
that delayed the release date from that initially
The PC Junior (PCjr) was introduced in November
1983 with high expectations as a low-priced home
computer. However customer deliveries of the computer
did not occur until early 1984. The PCjr had three
separate pieces of hardware: the system unit, power
transformer and cordless keyboard. Two configurations of
the PCjr were released, a standard model and an enhanced
model. Both models used the Intel 8088 microprocessor
operating at 4.77 MHz with 64K bytes of ROM. The system
unit had three expansion slots for 64K bytes of
additional memory, a floppy disk drive and a 300-bps
9/14 Part III 1980's- The IBM/Macintosh era
(bits per second) internal modem. An expansion bus
connector was also provided that could be used to
connect a parallel printer. The detached keyboard had 62
keys and used an optical infrared light transmission
technology to link between the keyboard and the system
unit. The keyboard did not have a numeric key pad or any
function keys .
The standard model had 64K bytes of RAM,
expandable to 128K and a base price of $669. The
enhanced model had 12 8K bytes of RAM, a capacity to
display 80 columns of text and a half-height 5.25-inch,
360K byte double-sided floppy disk drive manufactured by
Qume . The enhanced model had a price of $1,269. An IBM
Color Display monitor was available at a price of $680.
A new version 2.1 of PC-DOS with a cost of $65
was released for the PCjr. However the memory
requirements of the operating system limited the number
of application programs that would run on the computer.
The system was compatible with the IBM Personal Computer
(IBM PC) . No other operating systems were offered for
the PCjr. The standard model had Cassette BASIC in ROM
and an enhanced Cartridge BASIC was available for $75.
In early 1984 sales for the PC Junior were in
trouble and production was stopped in June to reduce
inventory. The high price, spongy-to-touch "chiclet"
style keyboard, limited memory and storage capabilities
had resulted in poor customer acceptance.
An advanced version of the PC Junior was
introduced in July 198 4. Various improvements to enhance
the performance were made, such as increased memory and
a new typewriter-style keyboard. Then an intensive
promotional campaign was launched in the late fall of
1984 to increase lagging sales. However after the
holiday season and the end of the promotional campaign
sales fell off again. It had been a market failure that
resulted in the computer being discontinued in March
The IBM Corporation 9/15
PC/XT 370 and 32 70 PC
The Information Systems Division that produced
mainframe computers, introduced the PC/XT 370 and 3270
PC computers in October 1983. These products were
designed to be a link to IBM mainframe computer systems.
The PC/XT 370 also had a designation of 5160
Model 588. This computer was an enhancement of the PC/XT
computer, with three additional boards to emulate IBM
System/370 mainframe computers and to function as an IBM
3277 display terminal. In addition to the standard PC/XT
Intel 8088 microprocessor, one of the additional boards
had three microprocessors. One of the three
microprocessors was an Intel 8087 for floating-point
arithmetic functions and the other two microprocessors
were based on the Motorola MC68000 for emulation of
System/370 instructions. The second additional board
extended memory by 512K to 768K bytes. The third board
provided emulation of the IBM 32 77 display terminal. The
computer also had one 3 60K byte floppy disk drive and
either a 10 or 20 megabyte hard disk drive. The PC/XT
370 cost $8,995 with a 10 MB hard disk and $11,690 with
a 2 MB hard disk. A software package named VM/PC
(Virtual Machine/Personal Computer) was reguired at a
cost of $1,000 to interface with a System/370.
The IBM 3270 Personal Computer also had a
designation of 5371 with Models 12, 14 and 16 depending
on the configuration. The computer combined a standard
IBM Personal Computer with an IBM 3270 display terminal.
The base computer had 256K bytes of memory, expandable
to 640K and a 122-key keyboard with all the keys of a
standard PC and a 3270 terminal. A 3270 PC Control
Program enabled the computer to concurrently access up
to four programs on a host computer, two "notebook"
data-storage transfer areas and a PC-DOS application
program. The Control Program also allowed a user to
define up to seven windows to monitor the programs being
accessed. The user could select the color, position and
size of any window. A base 3270 Personal Computer with
256K bytes of memory cost $4,130 and the 3270 PC Control
9/16 Part III 1980's- The IBM/Macintosh era
The Portable Personal Computer (PC) was
introduced in February 198 4. The unit measured 8 by 2
by 17 inches and weighed 30 pounds. With this weight, it
would become known as a "luggable." The portable used an
Intel 8088 microprocessor operating at 4.77 MHz, 40K
bytes of ROM and 256K bytes of RAM, expandable to 640K.
The unit had one 5.25 inch half-height 360K floppy disk
drive with provision for a second drive. A 9 inch amber
monitor was built into the unit, seven expansion slots
were provided (two used by the floppy disk drive and
monitor adapter) and the cost was $2,595. However Compag
had an earlier and better portable which sold at
virtually the same price which adversely affected IBM
sales and market acceptance.
Personal Computer A T (PC A T)
Two models of the PC AT (Advanced Technology)
were introduced in August 198 4. This was a significant
delay from the release date targeted in February 1982 .
The variations were a Base model with less memory and no
hard disk drive and an Enhanced model.
The microprocessor was the more powerful 16/24-
bit Intel 8 0286 operating at 6 MHz with an optional
Intel 80287 Math coprocessor. The permanent memory (ROM)
was 64K. The user memory (RAM) was 256K bytes on the
Base model and 512K bytes on the Enhanced model. With
additional expansion cards, the memory could be expanded
to three megabytes on both models .
Both models had one half-height 1.2 megabyte
floppy disk drive with provision for a second drive. The
Enhanced model had a 20 megabyte hard disk drive. Hard
disk drives with up to 40 megabytes capacity could be
installed in both models. The models contained eight
expansion slots for additional adapter cards . The
keyboard was an enhanced version of the PC keyboard.
Microsoft released Version 3.00 of PC-DOS and XENIX 28 6
operating systems for the new models.
The Base model cost $3,995 and the Enhanced model
$5,795. The computers were intended as replacements for
the XT computer. IBM stated that the computer was
designed to be a multitask, multi-user computer.
The IBM Corporation 9/17
Problems with the hard disk drive resulted in delayed
deliveries of the computer. However the AT computer had
good reviews and became a up-market replacement for the
XT. The operating speed of the PC AT microprocessor was
increased to 8 MHz in 198 6.
IBM approved development of a workstation
computer using the RISC (Reduced Instruction Set
Computing) ROMP (Research Office products
Microprocessor) processor in 1983. G. Glenn Henry was
the manager of hardware and software system development.
The project had the code name of Olympiad and became the
PC RT computer.
The PC RT workstation was introduced for work
such as CAD (Computer Assisted Design) in January 198 6.
It utilized a high performance (approximately 2 million
instructions per second) IBM ROMP 32-bit RISC processor.
An Intel 80286 microprocessor was used as a coprocessor
to facilitate program and user interface with the PC
family of computers . A Memory Management Unit (MMU)
extended the 32 bit processor address to a 40 bit
virtual address to provide advanced virtual storage
capabilities. The computer had one megabyte of memory, a
1.2 megabyte floppy disk drive and a 40 megabyte hard
disk drive. It utilized an AIX (Advanced Interactive
Executive) operating system based on AT&T's UNIX System
V operating system. The PC RT workstation cost $11,700.
The workstation was not received well due to poor
performance as compared to competitive products from
Apollo and Sun Microsystems . This resulted in a new
project with the code name of RIOS being started in 1986
to develop a new more powerful workstation that would
become the RISC System/6000.
IBM introduced the 5140 PC Convertible (code-
named Clamshell) laptop computer in April 198 6. The
computer name was selected because it could be used as a
portable or as a desktop with an expansion box and a
larger monitor. The unit weighed 12 pounds and featured
an Intel 8088 microprocessor, 256K bytes of memory, two
9/18 Part III 1980's~ The IBM/Macintosh era
3.5 inch 720K byte floppy disk drives and a 25-line
liquid crystal display (LCD) monitor. The computer cost
$2,995. However, the product was not successful due to
the use of an older processor, problems with the LCD
display and the early use of 3.5 inch floppy disk
PC/XT Model 286
The PC/XT Model 286 was introduced in September
1986. It featured the Intel 80286 microprocessor, 640K
bytes of memory, one 1.2 MB floppy disk drive, a 2
megabyte hard disk drive and cost $3,995. However the
late introduction and pricing relative to other
competitive products resulted in poor sales.
The Personal System/2 (PS/2) family of personal
computers was introduced in April 1987 (except the Model
25) . The "2" in the PS/2 product name, denoted a second
generation of personal systems. The Models 50, 60 and 80
had a new architecture with a proprietary Micro Channel
Architecture (MCA) bus. MCA was a 32-bit multitasking
bus that did not support the previous expansion cards
for the PC computer. IBM's intent was to regain control
of the open architecture and force clone manufacturers
to obtain a MCA license. The preceding models also
utilized a new video standard called VGA (Video Graphics
Array) that had improved screen resolution. The new OS/2
operating system developed by IBM and Microsoft was also
announced for use with the computers.
The following are some details of the various
PS/2 models introduced in April. The Model 30 was
available in two configurations and featured an Intel
8086 microprocessor operating at 8 MHz, 640K bytes of
memory and the PC XT bus. The Model 30-002 had two 720K
byte floppy disk drives and cost $1,695. The Model 30-
021 had one 720K byte floppy disk drive, a 20 megabyte
hard disk and cost $2,295. The Model 50 had an Intel
80286 microprocessor, one megabyte of memory, 1.44
megabyte floppy disk drive, 20 megabyte hard disk drive
and cost $3,595. The Model 60 featured an Intel 80286
microprocessor, one megabyte of memory, 1.44 megabyte
The IBM Corporation 9/19
floppy disk drive, 44 megabyte hard disk drive and cost
$5,295. The Model 80 was available in three
configurations using the Intel 8038 6 microprocessor and
a 1.44 megabyte floppy disk drive. The Model 80-041 had
one megabyte of memory, a 44 megabyte hard disk drive
and cost $6,995. The Model 80-071 had two megabytes of
memory, a 70 megabyte hard disk drive and cost $8,495.
The Model 80-111 had two megabytes of memory, a 115
megabyte hard disk drive and cost $10,995.
The Model 25 was a low cost computer, introduced
for business and educational users in August 1987. It
featured the Intel 8086 microprocessor, 640K bytes of
memory, a 720K byte floppy disk drive and cost $1,395.
A portable version of the PS/2 series, the PS/2
P70 was announced in May 1989. At a weight of 20.8
pounds it would now be called a "luggable." It used an
Intel 80386 processor, had 4 MB of RAM (expandable to 8
MB) , 120 MB of disk storage, MCA bus and a high-
resolution plasma display. The PS/2 P70 received good
reviews and had good sales.
The PS/2 series of computers were not well
received in the marketplace. IBM had focused on the
older Intel 80286 microprocessor rather than the latest
80386 chip. Also the incompatibility of the new MCA bus
with old add-on cards, the late release of the new
version and general poor acceptance of the OS/2
operating system, all contributed to sales below
expectations. The MCA bus was not supported by the
industry and became a strategic mistake for IBM.
9.5 ... Software
OS/2 and Microsoft
By the end of 198 4, Bob Markell who was a vice
president of software and communication products at IBM,
had created a task force to determine a suitable
operating system for future products. IBM had been
working on its own operating system called CP-DOS that
would be used for the 286 microprocessor initially and
the 386 microprocessor later. IBM also wanted a system
that incorporated multitasking, so a user could run more
9/20 Part III 1980's~ The IBM/Macintosh era
than one application at the same time. Company
management had mixed aspirations to develop the new
operating system internally independent of Microsoft.
However, discussions were held with Microsoft regarding
the new system that culminated in the signing of a joint
development agreement in June 1985.
The joint development efforts following the
agreement led to numerous difficulties between the two
different types of corporate styles . IBM was attempting
to satisfy many different corporate demands and were
adding an increasing number of personnel to the project
to maintain the completion schedule. Microsoft was
accustomed to software development with a small group of
talented programmers. However, Microsoft had conceded
final responsibility for the software design to IBM.
Another significant decision that would create
subseguent difficulties was the use of assembler
language to program the new operating system. This
choice and a focus on the Intel 8028 6 microprocessor for
the PS/2 series of computers would add to the complexity
and portability of the new system.
In mid 198 6 a new concept called Systems
Application Architecture (SAA) was approved for
implementation. This system provided a common software
development environment between the different IBM
hardware levels, from personal computers to mainframes.
However it also resulted in additional complexity to the
software. Also, a new graphical user interface that
would be called Presentation Manager, would be developed
by the graphics software group in Hursley, England.
The company was also now working on an Extended
Edition of the new operating system that Microsoft was
excluded from participating in. The Extended Edition
included communications and database services. IBM also
planned to introduce a set of office applications that
would be called OfficeVision for the Extended Edition.
During this period new personal computer hardware
was also being developed. The new hardware would have a
different bus concept called Micro Channel Architecture
(MCA) and an Advanced Basic Input/Output System (ABIOS) .
With strong enforcement of applicable patents this was
going to be IBM' s strategy to combat the clones .
The IBM Corporation 9/21
IBM announced the new operating system called
OS/2 with the Personal System/2 computers in April 1987.
A Standard and Extended Version 1.0 were released in
November. However it did not include the Presentation
Manager software that was now promised for October 1988.
Only a few application programs were available. The
program cost $325 (twice as much as DOS), reguired
additional memory and storage as compared to DOS, and
was not well received.
In May 1988, IBM joined the Open Software
Foundation (OSF) that was established to develop a
unified UNIX operating system for different platforms .
Then IBM purchased a license for the NeXTSTEP operating
system from NeXT Computer, Inc. IBM was intent on
establishing optional operating systems to OS/2 and PC-
IBM released Presentation Manager as part of OS/2
Version 1.1 in October 1988. The graphical user
interface had been developed by IBM in Boca Raton,
Florida, IBM laboratories in Hursley, England and by
Microsoft. The graphics were well received. However, the
lack of application programs and device drivers, the
reguirement for additional memory and the pricing
adversely affected sales.
During 1989, James A. Cannavino, the new head of
the Entry Systems Division began to guestion the
viability of OS/2 and the relationship between IBM and
Microsoft. His concerns related to the low acceptance of
OS/2, the income Microsoft derived from the PC disk
operating system software and the potential impact of a
new version of Windows being developed by Microsoft.
Software vendors were also expressing concerns regarding
the future market share of OS/2 and their significant
investments in application programs for the new
operating system. Cannavino had even recommended that
IBM drop OS/2 in March. However, corporate management
rejected his recommendation and instructed him to "build
a world class operating system. " Cannavino had
discussions with Bill Gates and a tenuous agreement was
announced at the fall COMDEX show that appeared to
support each companies system. However Cannavino had
been committed to OS/2, not Microsoft Windows. In late
9/22 Part III 1980's~ The IBM/Macintosh era
1989, Version 1.2 of OS/2 was released, however sales of
the OS/2 operating system were still well below
Displaywrite was a word processor developed by
IBM for the DisplayWriter workstation in 1980. It was
one of the few relatively successful application
programs written by IBM.
TopView was an IBM character-based user interface
that was announced in August 1984. It incorporated
windows and multitasking that enabled the running of
multiple programs with the ability to switch between
them. It was not released until January 1985 and cost
$149. However, it was slow, reguired a lot of memory and
did not have a graphical interface. Due to poor
acceptance it was withdrawn from the market in June
IBM released PC Network in conjunction with
Microsoft PC-DOS Version 3.1 in March 1985. It was
designed to connect the PC-family of computers in a
local-area network (LAN) .
A software group was formed by Joseph M.
Guglielmi in 1987 to develop an office system that would
facilitate the communication and sharing of information
and software such as databases, desktop publishing,
electronic mail, spreadsheets and word processors. The
application software used the name OfficeVision for its
products. David Liddle who had worked at Xerox PARC, was
a principal in the development of the OfficeVision suite
of software released in June 1989. However, it was not
graphically oriented, priced too high and was not
successful. IBM essentially disbanded the software group
IBM created a Desktop Software division in 1988.
It was established to market personal computer software
by IBM and other companies using the IBM logo. However
it was not successful either and was terminated around
The IBM Corporation 9/23
9.6 ... Corporate Activities
1980 and 1981 are significant years due to the
approval and release of the IBM Personal Computer (see
Sections 9.2 and 9.3) . John Opel became the chief
executive officer of IBM in January 1981.
In January 1982, the Department of Justice
withdrew its antitrust suit against IBM. In late 1982,
an executive search firm for Apple Computer contacted
Don Estridge as a potential candidate for the position
of president. However Estridge declined the offer.
Then in December 1982 IBM acguired 12 percent of
Intel Corporation stock for $250 million. Intel was
having financial problems due in part to Japanese
competition in memory chips. IBM made the stock purchase
to provide a secure source for its microprocessors and
to maintain the viability of domestic chip manufacturing
eguipment suppliers. This also resulted in Intel
licensing the manufacture of the chip to others. IBM now
had a second source for its microprocessors. IBM also
built a new highly automated factory to mass produce the
John Opel became chairman of the board and John
F. Akers president of IBM in February 1983. In August,
the Personal Computer unit at Boca Raton, Florida became
part of a new Entry Systems Division (ESD) and Don
Estridge was appointed president of the division. The
new divisional organization consolidated major
facilities at Boca Raton and Austin, Texas . It also had
worldwide responsibilities for product development and
management including plants in Greenock, Scotland and
Wangaratta, Australia. Joe Bauman became vice president
for manufacturing, Joseph Sarubbi director of
technologies and Dan Wilkie director of guality
assurance and technology for the new division.
Starting in 1983, the company began implementing
the traditional bureaucracy at the Entry Systems
Division. The freedom enjoyed by the original IBM PC
group was coming to an end. H. L. Sparks and James
D'Arezzo left IBM and joined Compag Computer Corporation
in 1983. Then in January 1984, Estridge was made a vice
president of IBM.
9/24 Part III 1980's- The IBM/Macintosh era
Responsibility for retail dealer sales of all PC
products was moved from the Entry Systems Division to
the corporate national sales organization in January
1985. John Akers became the chief executive officer in
February. In March, Estridge was promoted to vice
president of worldwide manufacturing for IBM and William
Lowe became president of the Entry Systems Division.
Then in a tragic plane crash, Don Estridge was killed at
the Dallas-Fort Worth, Texas airport in August. In late
1985, Dan Wilkie resigned from IBM to become president
of another company.
Joe Sarubbi retired from IBM and joined the
Tandon Corporation as a senior vice president of
manufacturing in February 198 6. In the spring of 198 6,
the number of IBM employees peaked at 407,000. During
198 6, IBM concluded a technological exchange agreement
with the Intel Corporation (See Section 8.4) . In June
John Akers became chairman of the board, a year that saw
significant reductions in IBM's financial performance.
In 1987, it appeared that the financial
difficulties encountered in 198 6 would continue. Akers
initiated the formation of task forces to evaluate the
problem. This resulted in the closure of a parts
distribution facility and a reduction of 10,000
employees by early retirement and severance package
options. IBM also sold the remaining shares of Intel
Corporation stock that the company purchased in 1982.
Akers announced a further reorganization to
delegate more decision making down to lower levels in
the company organization in January 1988. Then in
December William Lowe left IBM and joined the Xerox
Corporation. He was replaced by James Cannavino who
inherited an extremely difficult business situation in
the Personal Computer group. The group had lost 1.4
billion dollars in 1998, the PS/2 computer was not
selling, the MCA bus and the OS/2 operating system were
not accepted by either customers or the industry.
In March 1989, Cannavino made a number of
recommendations to the IBM Board to correct the business
situation of the PC group. Some of these recommendations
were: to significantly reduce the company's focus on the
desktop business, increase their participation in the
The IBM Corporation 9/25
portable and server segment of the business and drop the
OS/2 operating system. However, the Board wanted to keep
IBM in the PC business, retain the OS/2 operating system
and review the relationship with Microsoft. Cannavino
was also concerned about reducing IBM' s dealer and sales
organization costs, and competition from direct sellers
such as Dell and Gateway.
In May, Jack D. Kuehler became the president of
IBM and Cannavino was promoted to general manager of the
Personal Computer group in mid 1989. Around this time
Cannavino selected Bob Lawten to analyze IBM' s efforts
in the portable computer segment of the market. After
discussions and agreement with Bill Gates at Microsoft,
Cannavino made a recommendation that IBM purchase forty
percent of Microsoft. This would motivate both companies
to make the relationship work. However, this proposal
was rejected by the IBM Board. The reorganization and
changes implemented by Cannavino during 1989, resulted
in a change from a loss of 1.4 billion dollars in 1988
to a profit of 1.2 billion dollars in 1989.
Figure 9.6: James A. Cannavino.
Photograph is courtesy of IBM Corporation.
9/26 Part III 1980's~ The IBM/Macintosh era