Fumbling The First Down Of The New Os/2

It wasn't exactly a shining example of teamwork. In late March, three months behind schedule, a group of 400 IBM programmers in Boca Raton, Fla., finished the all-important Version 2 of OS/2, a personal-computer operating system aimed at replacing the aging MS-DOS. Counting heavily on the new OS/2 to blunt the success of Microsoft Corp.'s Windows program, which enhances MS-DOS, IBM had pumped some $ 40 million into ads and promotions. Finally, the 2 million-line program was ready.

Too bad IBM's distribution folks weren't. While some big corporate buyers got copies electronically via phone lines, ordinary PC owners and small businesses couldn't get OS/2 2.0. "Software dealers were dry," says Rock Blanco, computer chief at Garber Travel Service Inc. in Boston. He waited six weeks for copies ordered from IBM in May. Says Mike Kogan, a chief architect of OS/2 who left IBM in July: "The distribution was pathetic."

TOO SMALL, TOO FEW. Lucy Baney, vice-president for OS/2 market development, acknowledges the snafu. IBM's National Distribution Div., charged with getting goods to customers and dealers, had only about 200,000 copies, she says. And almost all were on 3 1/2-inch disks, even though many buyers wanted 5 1/4-inch. It wasn't until late May that IBM began meeting demand.

Such a problem shouldn't recur once IBM finishes reorganizing its Personal Systems Div. Baney says her software unit will forge stronger ties with NDD. While OS/2 stumbled, Windows leaped further ahead. Now, there are well over 10 million copies installed. "Microsoft is blitzing the storefronts," says John O. Dunkle, president of Workgroup Technologies Inc., a Hampton (N. H.) consultant. "If IBM undertook the same merchandising effort, how successful could it have been?"

That's hard to say. But IBM claims it's recovering from the shaky start. It is now planning a mid-August event marking the millionth copy of OS/2 2.0 sold. That includes at least 200,000 sent free to users of prior versions, plus the thousands shipped with IBM PS/2s. Still, at this rate, IBM may meet the low end of analysts' projections for 1992 -- about 2 million copies.

That's even more remarkable considering IBM's other missteps. The first shipments included minor bugs that IBM is now fixing. And expensive ads aimed at the individuals who are snapping up Windows actually "appealed more to the large corporate accounts" that already knew about OS/2, says Baney. This fall, IBM plans to fix that with its first TV spots for OS/2 in the U.S. And new print ads will be aimed directly at corporate buyers.

Microsoft, however, is already on to the next match. It's preparing for an early-1993 release of Windows New Technology, which should equal many of OS/2's benefits, such as running many applications at once without crashing. As Microsoft starts pushing NT, IBM had better make sure all its players are following the same game plan.

Before it's here, it's on the Bloomberg Terminal.