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John F. Akers 1934 - 1985-1993 – 2014

 
 IBM CEOs: Leadership ⇔ Challenges ⇔ Transformations in the IT Century

John F. Akers 1934 - 1985-1993 – 2014
(Highlights – Milestones – Excerpts)

Business Week Magazine, February 18, 1985:  “It is easy to see Akers’ appeal. He is confident, quick-witted, and extroverted – a ruddy faced salesman’s salesman with a firm handshake, a robust laugh, and an intrinsic grasp of his company’s 46B$ business … (He) seems to have the right blend of charm and aggressiveness to succeed …a steel hand in a velvet glove.”

Fortune Magazine described John Akers as the new IBM President as follows: “handsome, charming, articulate, supremely self-confident and relentlessly self disciplined, a chief executive from central casting, direct, decisive….[with] sharp instincts, sure grasp of the big picture, and undoubted ability to lead.”

Akers always had a regal aura about him. He was a forceful speaker, firm voice and command of his audience. Slow decision making seemed to make him nervous. When some executive suggested studying an issue further, Akers might snap: “Study? We do, we make, we buy, we sell. … “Look, do you want to make a decision on this? Or do you just want us all to drive home tonight and feel bad about it?”
Akers’ military bearing and punctuality accentuated his aura of leadership. … When in 1985 Akers addressed an IBM annual meeting for the first time he said, “IBM’s prospects have never been brighter than they are today.” (“Big Blues” by Paul Carroll published in 1993).

IBM is a master of balancing its long-term and short-term goals without sacrificing acceptable profit levels. If the information-processing industry grows to a trillion-dollar level in the 1990s, IBM, growing at the same rate, could be a 185 B$ company. Since 1979, IBM has invested about 13 B$ in its factories to improve quality and reduce breakeven points. (“The IBM Way” by Buck Rodgers published in 1986).

John Akers’ objective as predicted by John Opel in 1984: IBM growth to 100 B$ in 1990 - 185-200 B$ Revenue in 10 years.

In 1985, 75% of the company’s net income of 6 B$ still came from the mainframe

Sales per employee as an indicator of productivity in 1985 - Index: IBM 1,37; CDC 0,95; DEC 0,88; HP 0,50. 

The chip and its impact – 1985-1990: Supercomputers – Mainframes – Minicomputers – Microprocessors – Grosch’s Law under pressure

February 12, 1985: IBM 3090 Processor Complex announced; IBM’s large-system flagship; withdrawn from marketing May 1990.

February 19, 1985: President Ronald Reagan is honoring Fred Brooks, Bob Evans and Erich Bloch with the first National Medal of Technology. They were recognized for their contributions to the development of the IBM System/360, which helped to revolutionize the data processing industry.

Prof. Dr. Ing. Wilhelm G. Spruth: The S/360 Secret. Looking at todays [sic] information technology status, the landscape has changed beyond recognition since 1964. With one exception: the S/360 architecture. The S/360 architecture was introduced in 1964.  Nobody has been able to improve the basic design during the following nearly 50 years! We did an exercise with a group of experts a few years ago. We decided to travel back in time to 1963 and submit to Amdahl, Blaauw, and Brooks a proposal with a list of items, which – based on the knowledge available in 2008 – would improve the S/360 design. We compiled the list: it was surprisingly short and included no major items.”(Epilogue to: The Genesis of the Mainframe Bob O. Evans  - memoirs unpublished (Boeblingen, June 2010))

Project Fort Knox – started in 1982 to develop a RISC minicomputer family - terminated. 

In March 1985 Armonk announced: Don Estridge would become Vice President in charge of worldwide manufacturing for IBM, with HQ at Armonk. He would oversee the work of 116.000 people at 41 IBM plants in 15 countries. Bill Lowe would leave Armonk, go to Boca Raton where he would succeed Estridge as president of ESD. Estridge and Lowe appeared together at the meeting to announce the shifts in management. Estridge’s people rose twice to give their old boss standing ovations.

March 19, 1985: IBM shut its door on the PC Junior

ISG takes over PC Dealer management from ESD

IBM Educational Systems is formed as a business unit.

The development of OS/2 began when IBM and Microsoft signed the "Joint Development Agreement" in June 1985 (80286 and Assembler!)
It was code-named "CP/DOS" and it took two years for the first product to be delivered. The decision was made by a small group of top managers, including Kuehler, Armstrong, Lowe, and several others who debated the OS issue through most of 1984.

Before signing the JDA with Microsoft in mid-1985, Lowe and IBM had plenty of leverage over Microsoft. Afterward, they had none; they would never get it back. (“Big Blues” by Paul Carroll published in 1993).

Estridge’s plans: private farewell parties => a few vacation at Sanibel Island, Golf of Mexico => farewell party Boca Raton => Jackson Hole, Wyoming with close friends => IBM HQs Armonk.

Friday, August 2nd, 1985: The Dark Days at Dallas and Boca Raton – due to a thunderstorm Delta Airlines Flight 191 crashed killing 137 of 152 passengers including 8 IBM employees, 7 members of IBM families, 2 college students working for IBM as temporaries that summer. Don Estridge and his wife Mary Estridge were among the victims. TV Film 1989: “Fire and Rain – The true story of Flight 191.”

IBM is second only to the Roman Catholic Church when it comes to ceremoniously burying its dead. Akers gave full authority to do whatever was necessary to ease the grief of the IBM families who had lost loved ones on Flight 191. The funeral began on Monday, August 5th, 1985 and did not end until the following Friday.

The funeral for Don and Mary Ann Estridge was held on Wednesday, August 7, at the Ascension Roman Catholic Church in Boca Raton.
More than 1.000 people attended the Mass, Including John Akers and other senior officers of the IBM Corporation. Each of the pallbearers wore a red rosette in his lapel. The choir sang Mary Ann’s favorite hymn, “The church in the Wildwood”. This was followed by Don’s favorite, “Swing Low, Sweet Chariot.”

IBM's president and chief executive officer John F. Akers said at the time: "Don Estridge was a man of vision whose skill and leadership helped guide IBM's personal computer business to success. He had a very bright future in our business. He and Mary Ann will be greatly missed by all their friends and colleagues.“

Dan Wilkie still meets young engineers who fall all over themselves when they learn he was a member of the team that developed and built more than 3 million of the original IBM PCs. “They look at it as the round table of IBM, with Don Estridge as King Arthur and the rest of us as knights in the days of Camelot”, he said. “The most important thing has nothing to do with the fact that the PC group doesn’t exist anymore. What’s important to remember is what the group stood for and what it accomplished. By God, we were a team that created an industry for IBM and put the company’s name on more products in more places than it had ever been before.” “No one can ever take that away from me and the other people who built the first IBM PC.” Then, ever so absentmindedly (because it has become a habit), Dan Wilkie gently strokes the lapel where he once wore the proud symbol of his allegiance - the rumpled rosette now lying buried with his beloved leader and the lost dreams of Camelot.

John F. Akers, many years later, said that he believed Don Estridge had the potential to head up all of IBM or certainly to be one of the top six executives within the company. (“Blue Magic” by James Chposky and Ted Leonsis published in 1988).

November 1985: Windows 1.0 released.  

IBM introduced in January 1986 the IBM RTPC  or IBM 6150 Workstation based around IBM’s ROMP Processor – Research (Office Products Division) Micro Processor, a spin off of the IBM 801 pioneered at IBM Research. The 6150 operating system was called AIX for Advanced Interactive eXecutive. It was just an Unix System V with Berkeley 4.2 enhancements and IBM adds for the 6150 environment.

March 13, 1986: Microsoft went public.

Spring 1986: IBM peak employment of 407.000.

IBM convertible Laptop introduced in April 1986 – without having a modem.

May 1986: IBM delivered its 100,000th IBM System S/36.

August 1986: IBM released the IBM PC/XT-286.

The onslaught by the clones that started in late 1985 had cut IBM’s share of PC sales to business customers from >70% to <40%

September 1986: Compaq DeskPro announced based on the next-generation Intel 80386 microprocessor several times as fast as the IBM PC/AT. Intel led by Andy Grove turned to Compaq – the mantle of technological leadership passed to Compaq that day (“Forbes – Greatest Technology Stories” by Jeffrey Young published in 1998)

October 7, 1986: IBM announcement of IBM 9370 as “baby-mainframe” low-end mid-range computer compatible with IBM /370.
Positioning versus IBM Serie /1, IBM 8100, IBM S/38, IBM S/36, IBM 6150 and DEC as “VAX-Killer.” 

October 1986: IBM names Frank A. Metz, Jr. as CFO.

End of 1986: Mike Armstrong moved to Paris to run IBM EMEA

IBM Revenue/Profit 1982-1986 in B$: 34; 40; 46; 50; 51; / 4,4; 5,5; 6,6; 6,6; 4,8. Revenue increase 1985/1986 far from >15%. Earnings slid 27%. Akers response: a series of task forces.   

By early 1987 Gates offered IBM a share in Microsoft. Lowe came back and said he’d pass. (“Co-opetition” by Nalebuff and Brandenburger published in 1996).

March 1987: IBM’s biggest software initiative of the 1980s announced as Systems Application Architecture (SAA).  The SAA initiative was started under the leadership of Earl Wheeler, the "Father of SAA". The intent was to implement SAA in IBM operating systems including MVS, OS/400 and OS/2.

April 1987: IBM Personal System /2 with Microchannel Architecture OS/2 announced. Microprocessors: 80286 and 80386 (high-end).  
Microchannel: patent protected, incompatible with the industry.

In the fall of 1987 at a major Digital conference, Ken Olsen, DEC CEO, was asked what impact the rumored Silverlake announcement would have on his VAX minicomputer business. He replied that IBM Rochester’s systems weren’t competitors for Digital. Some of us kept a copy of his remarks in our offices. We knew he’d soon have a big surprise. (“Fortress Rochester” by Frank Soltis published in 2001). IBM AS/400 on its way. 

IBM sold its 20% Intel stake.  

December 9, 1987: Windows 2.0 released. By 1989, 2 million copies of Windows 2.0 had been sold.

IBM PC market share 1984 versus 1987 according to Infocorp: 63% versus 38%.

Rise of the Internet: in 1987, IBM, working with the U.S. National Science Foundation and our partners at MCI and Merit designed a new high-speed National Science Foundation Network (NSFNET) to connect US universities and 6 US-based supercomputer centers. (IBM Icons of Progress).

More than 30.000 networks are based on IBM’s Systems Network Architecture (SNA.)

Shipments of the IBM Personal System /2, announced in April, reached one million units in seven months.

January 1988: IBM announced the Enterprise System /3090, the industry’s most powerful general purpose processor taking advantage of the IBM’s Enterprise Systems Architecture /370.

June 21, 1988: IBM announced the IBM Application System AS/400. “…There are lessons in these pages for almost all firms of all sizes. … This is not a recipe book. …IBM says it has 50.000 competitors - the Silverlake team discovered 250 major competitors in their bailiwick alone. …Hats off to the IBM Rochester for what they achieved - and for telling us about it. …Tom Peters The Tom Peters Group. … IBM’s stock shot up more than 10 points, solely on the strength of the AS/400’s market introduction. Sales took off. We hit our annual sales projections for Europe - 13.000 machines - in just 60 days. Within 4 months: 25.000 units, it exceeded the pace set by the IBM PC 1981. …
Big Blue puts the bite back into its mid-range systems”. (“The Silverlake Project – Transformation at IBM” by Bauer, Collar, Tang published in 1992).   

The AS/400 quickly grew into a 14 B$ a year business. It sent arch minicomputer competitor DEC and its snotty ads crashing to earth and got the Digital board to dump founder Ken Olsen. ((“Big Blues” by Paul Carroll published in 1993).

The Extended Industry Standard Architecture (in practice almost always shortened to EISA) is a bus standard for IBM PC compatible computers. It was announced in late 1988 by PC clone vendors (the "Gang of Nine") as a counter to IBM's use of its proprietary Micro Channel architecture (MCA) in its PS/2 series.

IBM PS/2: IBM had lost control of all four of the important personal computer standards. The microprocessor, the operating system, the bus, and the graphic system. IBM was just another clone-maker. (“Computer Wars” by Ferguson & Morris published in 1993.)

Late 1988, Ed Lucente sent to Japan to run IBM’s huge Asian operation, his successor: George Conrades; William Lowe left IBM in December 1988 to take a job at Xerox. He was succeeded by Jim Cannavino, former head of the mainframe division.

December 1988: IBM decided to sell to Siemens the manufacturing and development half of Rolm,

1989: IBM names Frances Allen its first woman IBM Fellow.

In April 1989 at COMDEX in Chicago, IBM demonstrates a PS/2 Model 70 A-21 using Intel’s new i486 microprocessor.

IBM’s third entry into the portable marketplace, the PS/2 P70-386 was announced May 1989. PC World September 1989: “This time IBM did it right.”

Special IBM THINK September 1989 edition: IBM Corporation celebrates its 75th Anniversary in May 1989. Thomas J. Watson Sr. joined CTR which he renamed “IBM” in 1924. Five Corporate Goals: “To enhance our customer partnerships. To be the leader in products and services – excelling in quality and innovation. To grow with the industry. To be the most efficient in everything we do. To sustain our profitability which funds our growth.” Unfortunately, the reality develops differently. .   

By the end of the decade IBM’s PC market share worldwide had dropped from around 50% in 1985 to 22.3% in 1989. Leaders in Personal Computers - Compaq, Apple and IBM. (“Inventing the Electronic Century” by Alfred D. Chandler published in 2001).

IBM Revenue/Profit 1987-1989 in B$: 55.2; 59.7; 62.7;/5.3; 5.5; 3.8.

The RS/6000 family replaced the IBM RT computer platform in February 1990 and was the first computer line to see the use of IBM's POWER and PowerPC based microprocessors.

When the workstation was announced in 1990, it stunned its competitors, who had seen IBM miss so often with the RT that they thought it would never get a workstation right. The new machine called the RS/6000 was almost twice as powerful as the next powerful workstation on the market.

Windows 3.0, a graphical environment, is the third major release of Microsoft Windows, and was released on May 22, 1990. Windows 3.0 became an instant success. It had “a vast array of supporting third-party software including a long list of excellent applications from Microsoft that somehow never got developed for OS/2.” (Ferguson and Morris - Computer Wars - 1993). Gates had achieved his goal. This was only the beginning. ((“Inventing the Electronic Century” by Alfred D. Chandler published in 2001).

June 26, 1990: The IBM Personal System/1 introduced – it was a compact, easy-to-use computer primarily for use in the home.

September 1990: The IBM Enterprise System/9000 (ES/9000) provides the most extensive computing range ever offered within a single processor family. Based on IBM's newest technologies and proven systems architecture, this powerful processor family provides over 100-fold growth from the smallest rack-mounted systems to top-of-the-line, general-purpose computers. The result is a new era in computing that redefines management of the computing environment and lifts computing power to new levels of performance, designed to generate new and better solutions to specific business needs.

October 10, 1990: IBM Rochester wins Malcolm Baldrige Quality Award 1990, the highest award in the United States for quality.

IBM 1990: a terrific year, partly because of the AS/400 letting IBMers gloat as DEC unraveled. 

IBM Revenue/Profit 1989/1990 in B$: 62,7; 69,0;/3,8; 6,0.

John Akers’ first quarter 1991 outlook deteriorated significantly between the board meeting end of February 1991 and March 1991.
Lexmark was formed on March 27, 1991 when IBM divested a number of its hardware manufacturing operations, including printer and printer supply operations – IBM Lexington, Kentucky -, to the investment firm Clayton, Dubilier & Rice, Inc. in a leveraged buyout

IBM Laptop came out in March 1991.

IBM OS/2 release 2.0 announced in April 1991.

In late April 1991 Akers called together his top 20 managers to review them one by one … and addressed one of the most prestigious management-classes the next day. One participant took notes to distribute them to his colleagues. Soon copies leaked to a couple of newspapers. The publicity caused more of an uproar than IBM had ever seen. (“Big Blues” by Paul Carroll published in 1993).

In an internal memo to Microsoft employees on May 16, 1991, Bill Gates announced that the OS/2 partnership was over, and that Microsoft would henceforth focus its platform efforts on Windows and the Windows NT kernel. Windows NT is a family of operating systems produced by Microsoft, the first version of which was released in July 1993.

July 3, 1991: Apple and IBM shocked the computer world by announcing that they would collaborate on technology for future computer systems. The POWER architecture was the starting point for the joint effort between Apple, IBM, and Motorola in 1991 to develop a new RISC processor architecture. To meet the future needs for all three corporations, certain modifications to the POWER architecture were required. The POWER architecture did not support multiprocessor systems, so these features had to be added. New features were also added to support anticipated future applications. Finally, the 32-bit architecture of POWER was extended to include 64-bit addressing and operations.
The changes resulted in the new PowerPC architecture. (“Fortress Rochester” by Frank Soltis published in 2001).

Late October 1991: last meeting between Akers and Gates – no agreement about licensing of Windows by IBM. 

Late 1991, Bob LaBant replaced George Conrades.

December 1991, Akers’ vision: break up each IBM division into 13 units with the aim of spinning them off from “Big Blue.” Most of the units would be product groups. Akers also presided over a major downsizing of IBM's workforce, cutting down from 407,000 to 360,000 by the end of 1991.  

IBM Revenue/Net Earnings in B$/Cost/Operating Expenses/Net Earnings/Employees 1990/1991 (IBM Annual Report 1991): 69.0; 64.8;/6.0; 0.1;/30.7; 32.5;/27.3; 31.4;/6.0; -2.8. At December 31, 1991, IBM and wholly owned subsidiaries employed 344,396 persons on a regular, full-time basis, down 28,893 from 1990, 38,824 from 1989, and more than 62,000 from the peak level reached in 1986. Looking Forward: By the end of 1992, the work force will have been reduced by approximately 80,000 employees from the peak in 1986. “Nineteen ninety-one was a difficult year for the computer industry and a disappointing year financially for IBM. Even after taking into account the effects of war and a recession-weakened global economy, we did not achieve the results we wanted. … We continue to take aggressive actions to make IBM more competitive and efficient, and we begin 1992 resolved to increase revenues, gain market share, and improve cash flows and returns. … As we begin 1992, we have set in motion comprehensive changes that are redefining IBM from a single, centralized company into a network of more competitive businesses. Our manufacturing and development businesses and our marketing and services companies will be increasingly free-standing; each more independent, fast, and focused on the markets it serves; responsive to its customers and accountable for its results. At the same time, these businesses and companies will remain linked and able to draw upon the full range of IBM’s technological and financial resources. … M&D businesses will sell their products not only to IBM marketing and services companies but also to other manufacturers. … We believe full employment reinforces pride and morale in our work force. However, it is increasingly connected to individual performance and business success. If further significant reductions are required, we will reassess full employment and do what is best for IBM. … Underlying all these plans and prospects are fundamental values of IBM and its Basic Beliefs of respect for the individual, excellence, and superior customer service. They will continue to serve as IBM’s compass to steer by in the exciting years ahead. … Employees continue to be the company’s most important resource.”

IBM 1986-1991: losing share slowly in slow-growing markets – Mainframe and Minicomputers: 37% to 28% - and losing share faster in fast-growing markets – PCs and Workstations 29% to 17%. Source: McKinsey Database in “Computer Wars” by Ferguson & Morris published in 1993.   

Revenue of Other American computer companies 1987-1991: Unisys -2,7%; CDC -13,7%; Wang -6,6%; DEC 12,0% increasing revenue from 9,4 B$ to 13,9 B$; Compaq 41,8% increasing revenue from 1,2 B$ to 3,3 B$; Apple 34,3% increasing revenue from 2,7 B$ to 6,34 B$;  Intel 37,7% increasing revenue from 1,9 B$ to 4,8 B$; Sun 124,8% increasing revenue from 0,5 B$ to 3,2 B$; Microsoft 108,2% increasing revenue from 0,3 B$ to 1,8 B$.          

IBM ships its 200,000th AS/400 computer to Heineken Netherlands. Nearly 300,000 of its predecessor systems – the IBM System /36 and IBM System /38 – remain in service.        

Forbes Magazine polls nearly 6000 business executives to discover how they rate the largest companies in US on eight criteria. IBM in 1985 No. 1; 1987: No. 7; 1988: No. 32; followed by No. 34 and 35; in 1992 IBM was placed 206 out of 311 runners. (“The Fate of IBM” by Robert Heller published in 1994).   

March 1992: IBM released OS/2 2.0 – the first 32-bit version of OS/2 now written in C. Windows 3.1, in the meantime, was selling a million copies every two weeks.

April 1992, IBM rolls out a new series of notebook computers – the first IBM ThinkPad.

June 1992, new Compaq CEO Eckhard Pfeiffer, announcement of a completely redesigned line of inexpensive computers costing some 40% less than IBM’s. The second quarter was the worst Cannavino had ever seen, the third was even worse. (“History of Modern Computing” by Paul E. Ceruzzi published in 2003.)

July 1992, Ken Olsen, DEC founder and CEO retired (“I got fired”).

Wang: Chapter 11 in August 1992.

September 1992: IBM Personal Computer Company is formed as a separate operating unit.

IBM’s storage business is named ADSTAR; the IBM Consulting Group is launched with 1,500 consultants.

IBM ThinkPad family announced in October 5, 1992. The first IBM ThinkPads were very successful, and soon collected more than 300 awards for design and quality. Richard Sapper was the individual most directly responsible for the actual industrial design of the IBM ThinkPad. The IBM TrackPoint was conceived at IBM’s Almaden Research Laboratory, an ergonomic laboratory in San Jose’s foothills. Its brilliant but somewhat eccentric creator, Dr. Ted Selker, was director of the ergonomic lab and had been studying man-machine interaction for years. Before Sapper’s involvement, the TrackPoint was to be blue. Sapper felt, it should be red resp. magenta.  

IBM PS/Value Point announced.

Kuehler breakfast with Gates in October 1992: the relationship finally ended. Microsoft grew from 32 employees to 12.000 employees. 

Comdex, November 23, 1992: IBM Simon, the first mobile phone with Personal Digital Assistant (PDA) features presented (considered as the first smartphone).   

The IBM AS/400 system was named DATAMATION magazine’s “overall product of the year” for 1992. (IBM Annual Report 1992).

IBM has more than 20,000 business partnerships worldwide.  

Security analysts had begun 1992 projecting a 4 B$ profit for 1992. Early December 1992: Akers had to confess publicly that he had missed his financial forecasts yet again. IBM was on its way to a 5 B$ loss, the widest deficit any company had ever reported.

With some nudging from James Burke, Johnson & Johnson CEO and member of the IBM Board, Akers brought back a couple of senior IBMers who had retired, Paul Rizzo and Kaspar Cassani, to help gather better information.

Since 1985 ten out of 40 plants have been taken out of our manufacturing base. (IBM Annual Report 1992).

Tom Watson Jr. did break the silence in late 1992 in an interview with the Wall Street Journal: “When you see something you love have great difficulties, you are very sad about it. I have every confidence they’ll prevail. But meanwhile it’s a pretty hard pot of porridge to digest for an old timer.”   

IBM Board of Directors Meeting on January 26, 1993: the board approved a dividend cut of 55%; IBM Senior VP CFO Frank A. Metz to retire,  Kuehler elected Vice Chairman and retired August 1993;  Mr. Rizzo, a former IBM vice chairman who retired in 1987, rejoins the company after serving as the dean of the business school at the University of North Carolina. "We are pleased that Paul is rejoining the IBM team," Mr. Akers said.
ARMONK, N.Y., Jan. 26 /PRNewswire/ -- IBM Chairman John F. Akers today announced that the IBM Board of Directors has accepted his recommendation to begin the process of selecting a new chief executive officer for the company. Mr. Akers will remain as chairman and CEO during the selection process, which will consider candidates from inside and outside the company. The process will be managed by the board's Nominating and Executive Compensation Committee, which is chaired by James E. Burke, and is expected to take approximately 90 days.
Mr. Burke said, "IBM could not have had more effective leadership in these turbulent times. John Akers has made the tough choices required to restructure the company, improve its competitiveness, and position it for improved profitability. The board has accepted his recommendation to accelerate the process of selecting a new chief executive officer, which he believes will speed progress toward improved business performance." 0- 1/26/93 /CONTACT: Rob Wilson for IBM, 914-765-6565/

IBM Revenue/Net Earnings in B$ 1992: 64,523/-6,865. Employees Regular, FT 1986/1992: 407.080/301.542 (IBM Annual Report 1992).  

Market Value ($mill.) 1989/1992: IBM 60,345/30,715; Microsoft 6,018/23,608; Intel: 7,842/24,735. (“Waves of Power” by David Moschella published in 1997).

IBM’s stock nadir hit on August 16, 1993: in the six years since August 20, 1987, about 83B$ in wealth (not adjusting for inflation) had simply disappeared. (“The Watson Dynasty” by Prof. Richard S. Tedlow published in 2003).