Ibm And Apple: Can Two Loners Learn To Say `Teamwork'?

The deal was done with little fanfare: There was no press conference with flashing strobes and television cameras, no meeting with Wall Street's pundits, no explanation to customers. Instead, the day short history.

IBM says it is keeping mum because the deal, which calls for extensive technology sharing between the two former rivals, is only tentative. Final contracts won't be signed until later this year. "What we've done is outline the areas of discussion," says Joseph Guglielmi, an IBM vice-president. "It will raise hundreds of questions."

NOTHING GAINED. That's for sure. One of the first is whether the alliance will actually lead to much. After all, Big Blue has a history of high-profile alignments that fizzled before they delivered anything. Among its most notable: The $1.25 billion acquisition of telecommunications giant Rolm Corp. in 1984. IBM hinted that that buyout would give it the leverage to outdo American Telephone & Telegraph Co. But after repeated difficulties in integrating Rolm's wares into IBM's product line, Big Blue sold most of Rolm to Siemens in 1989.

But IBM in 1991 isn't the IBM of 1984. When it did its deal with Rolm, Big Blue was at the top of its form, and its imperial management style made integration of the two nearly impossible. Now, IBM is desperately trying to stem market-share erosion and profit decline and to boost stagnant revenues. That has created an IBM willing to swallow its pride and turn to outsiders for help. That augurs well for the partnership, as long as Apple can overcome its long-running hostility to IBM and show an interest in teamwork. For IBM, the Apple deal is just the latest in a series of alliances aimed at moving IBM quickly into the 1990s by giving it access to important new technologies (table).

IBM's crisis-inspired cooperative spirit is just what's needed to make its deal with Apple--and the others--successful. For now, the two companies aren't making any pledges they can't keep. The world's No. 1 and No. 2 PC makers, which combined have 38% of the $93 billion PC market, promise only to create new computers "for the 1990s."

Both clearly plan to do more. Their goals are impressive: Under the agreement's terms, IBM and Apple plan to jointly develop software that will make it easier to link Apple and IBM computers on networks. That will help Apple move more aggressively into big corporate accounts. And the two have also agreed to form a joint venture to develop new operating system software, which provides a PC's basic instructions. That's clearly targeted at unseating Microsoft Corp., an IBM partner turned rival, from its role as the primary provider of such software.

With the deal, IBM also has a good shot at displacing its most nettlesome PC competitor, Compaq Computer Corp. The agreement gives Apple access to IBM's reduced instruction-set computing (RISC) chip. Apple will leverage the silicon deal to advance into workstations. Those products will throw weight behind IBM's RISC, which it uses in itsRS/6000 computer, and hurt attempts by Compaq to create a standard with another RISC chip.

And if all that isn't enough to keep IBM collaborating happily with Apple, there's another aspect that probably will: the threat from Japan. The two companies plan to jointly develop multimedia--the integration of video and sound with computer text. Multimedia is expected to be a hot button this decade, and a razzle-dazzle product from IBM and Apple would throw cold water on Japanese attempts to come up with similar machines. Just the threat of the deal will likely endanger one such effort: Although Apple never formally admitted to the relationship, it had been working with Sony Corp. on multimedia.

Long-term, IBM wants to do more than trump Microsoft, Compaq, or the Japanese. IBM wants to pull out of its well-documented malaise by wresting control of the personal computer. The goal? A return to its PC glory days of the early 1980s, when its technology set the industry's agenda.

To do so, IBM must invest in its own research--it can't farm out innovation forever. Still, if it can set aside its haughtiness and resist the temptation to overwhelm Apple and its other partners with bureaucracy and advice, it may find itself in the driver's seat.

      Partner/Date deal struck         Purpose
      GO/July, 1990                 Handwriting-recognition software
      METAPHOR/September, 1990      Operating system development
      NOVELL/February, 1991         Rights to networking software
      BORLAND/May, 1991             Rights to software development tools
      WANG/June, 1991               Access to imaging technology
      LOTUS/June, 1991              Access to electronic mail technology
      APPLE/July, 1991              Extensive technology collaboration
      DATA: BW
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