IBM Corp. (NYSE: IBM), otherwise known as "Big Blue," turned 100 today, marking a major milestone in the company's history and, more importantly, helping to focus the technology world's collective mind on the history and future of the high-tech industry.
No other company represents the industry's past better than IBM. Incorporated as Computing-Tabulating-Recording Co. (CTR) in 1911, IBM has morphed since then into a $100 billion company with more than 426,000 employees (compared with 1,300 at its inception).
Of greater interest to the technology world is the role the company has played in the industry's growth. It's not an exaggeration to state that the high-tech market would not be what it is today without IBM and some of the extraordinary innovations that came out of the company. In my opinion, IBM is unparalleled in the history of the high-tech market and can unhesitatingly be described as the engine that drove the industry's growth.
IBM scored numerous firsts in its 100-year history, including the first bar code, the magnetic hard drive and magnetic strip for credit cards, the floppy disk, the personal computer, and numerous main frame computing technologies. Many innovative products introduced over the last century by IBM form the backbone for most of the technology products in use today.
In fact, the technological innovations from IBM are too extensive to list here. For additional information on the company's history click here. For those whose appetite for history is big enough, or who want to understand better how IBM structured itself and the underlying strategy behind its growth, the company has prepared a "how to" document that can be downloaded here. I plan to excerpt at least one of these in a separate blog today.
Here, though, I would like to concentrate on IBM of today and the forces that may drive the company over the next years. IBM has taken steps many would consider suicidal: It led the creation of the memory IC (DRAM) market but exited the sector, dumped its PC business (selling the division to China's Lenovo Group), and has focused on higher-end services, consulting, and more research intensive activities.
These actions, which hurt sales, were heavily criticized at the time, but the company took the steps because it visualized a different future for itself. Low-margin businesses and what IBM described as a "seismic shift in the world" compelled the company to make these moves in a bid to improve its competitiveness.
History has yet to deliver its verdict on some of these steps. IBM gamely fought the corrosive effects of commoditization on its operations but has seen limited revenue growth as a result. In 2010, IBM reported revenue of $99.9 billion, up 4 percent, from $95.8 billion in 2009 but down from the $103.6 billion reported in 2008. Net income has been improving, though, rising to $14.8 billion in 2010 from $13.4 billion and $12.3 billion in 2009 and 2008, respectively.
These are not numbers IBM should celebrate. Its sales growth is not comparable to that of Apple (fiscal 2010 revenue of $65.2 billion) or Google ($29.3 billion in 2010 revenue), and the company's market value is well below that of Apple ($302 billion versus $198.5 billion.) The story behind those numbers is simple: IBM just isn't the fastest-growing or the most profitable company in high-tech today. Its sales are forecast to reach approximately $106 billion in 2011 while Apple's will be approximately $103.4 billion for the current fiscal year. Within the next year, Apple's sales will eclipse those of the century-old company.
So, let's celebrate with IBM and acknowledge all it's achieved in the last 100 years. But the company will also need to deliver more than it has in recent years. IBM's history of innovation can make this possible, and its future demands it.