Old habits die hard at IBM

Some say Big Blue can't afford to continue losing money trying to market desktop computers. Others counter that PCs are a necessary evil that IBM must suffer in order to land global corporate contracts.

I have a more interesting question: If IBM did get out of the PC business, how long would it be before its employees knew? Six months? Seven months? Who knows--maybe even longer!

Although it's the oldest high-tech company, IBM remains the most fascinating, partly because of its sprawling size. In 2000, the company pulled in $88.4 billion in revenue and $8.1 billion in net income. IBM controls $896 million worth of real estate and $22.4 billion in plant, laboratory and office equipment in Eritrea, Djibouti and Guyana, among other countries (although still no offices in Chad or Laos).

Also, 316,303 employees worked full time at IBM while another 47,386 toiled in affiliated companies on behalf of 664,791 stockholders. Retiree clubs still meet in company cafeterias. Four researchers have won Nobel prizes--something companies like 1-800-Dentist will never claim.

Strategic shifts, therefore, can't be examined, or even implemented, in the same manner at IBM as they might be at other large companies. It's just too damn big.

In many companies, for instance, internal divisions work closely together. IBM has both a personal computer division and a semiconductor division but the IBM PC rarely uses microprocessors from the semiconductor group. It's not that the PC division distrusts the semiconductor division. But in its pursuit of objectivity and impartiality, the PC group ends up avoiding in-house products.

One handy way to think about the company is to think of it as Europe. Will IBM ever go bankrupt? No. Continents don't go out of business. At worst, the economy suffers. Exit the PC market? Too great a cultural shift. The equivalent would be getting Germans to renounce David Hasselhoff or Speedo bathing suits. Change comes in small doses, in the form of new divisions (Moldova) or executive retirements (Enver Hoxha).

Chief executive Lou Gerstner sits on top of the pyramid, but it's hard to even envision him in complete control. In fact, it's hard to envision him period. Unlike Sun's Scott McNealy or Microsoft's Bill Gates, Gerstner rarely makes public appearances and hardly accords interviews. If rumors surfaced that the IBM board had placed him in a cryogenic freezer last year and substituted Ernest Borgnine in his place, it would be tough to find clues to refute it.

But the reign of Lou is a far cry from the Imperial era. From 1911, when the Computing-Tabulating-Recording Co. formed, to 1993 when John Akers retired as CEO, IBM's story was one of conquest, hierarchy and stability.

Hold that door, please
William Giles, now a public relations official at Intel, recalls a day when Akers visited the Research Triangle Park, N.C., facility in the early 90s. Corporate headquarters told North Carolina not to make a fuss. Buildings were entirely repainted. Security was beefed up. "It was one of these 'The Eagle has Landed' sort of things," he said.

Giles' job in the event? He held an elevator in the lobby so that when Akers arrived he wouldn't have to wait. To complicate matters, Giles had to act casual, as if he were just hopping off.

"It continued the perception that these guys (CEOs) have that life is far easier than it really is," Giles said, laughing. Giles held the door for ten minutes. Luckily, he could see Akers' entourage coming in a reflection off the ceiling so he managed to strike a nonchalant pose in time.

The trappings of power left when Gerstner came in and the promise of lifetime employment disappeared with layoffs. Employees first began to question directives given to them by their managers, relayed an engineer. Executives at corporate headquarters in Armonk, N.Y., got moved from offices to cubicles.

Nonetheless, old habits fade slowly. If a VP and a director have a meeting, the meeting takes place on the VP's turf, never the other way around, said one former employee. Casual day replaced the suit in the last decade, but some guys had trouble adjusting. They initially wore regular shirts, but with pants from the suit. Now, everyone has gravitated to a blue shirt and khakis.

"You double- and triple-check everything," said one source. How budgets for equipment and talent get allocated still remains a mystery, said another. On the positive side, when it comes to layoffs, the company spares no expense.

So what does the future hold? That's right. More of the same.

As the corporate timeline shows, the company has plugged forward through world wars, technology transformations and the emergence of the digital economy. Compared with all that, the recent upheavals in the marketplace are a veritable drop in the bucket for IBM.