How IBM Started, Grew and Became $170 Billion Company

Tuesday, September 21, 2021

In 1911, Charles Ranlett Flint founded the International Business Machines (IBM) as aholding company for four other business companies. It is an American Information Technology Company and one of the world’s biggest electroniccomputer companies and systems integrators with operations in 177 countries.


Began as the Computing-Tabulating-Recordingcompany in 1911. Charles Ranlett Flint formed the holding company CTR from the amalgamation of four other companiesand their patents: Julius Pitrap Computing Scale, Herman Hollerith's Electric TabulatingMachine, Alexander Dey's Dial Recorder, and William Bundy's Time Clocks. Primarily, Flint founded CTR with a "four heads are better than one" approach towardsfulfilling financial obligations and manufacturing products for automating routine business processes,thereby increasing productivity, while reducing defects and human errors.CTR manufactured a wide range of machinery from industrial time recorders, tabulators,punched cards to meat and cheese slicers.

Within the first year, CTR earned $950,000 from the production of its four companies. Flint offered former National Cash Register (NCR) official Thomas Watson Sr. a positionas General Manager in 1914. NCR CEO John Henry Patterson had sacked Watson Sr. for his and other officials' roles inantitrust violations. Despite initial concerns from the CTR's board, Watson Sr. proved himself a trustworthy characterto the extent that he ascended the ranks from General Manager to CTR’s President in amere 11 months. With the NCR fiasco behind him, Watson Sr. put what he learned from Patterson's salesschool of business methods into CTR. The slogan "THINK" became the company's anthem, inspiring integrity, and loyalty from itsemployees, as well as salesman-customer relationships that would become the future of CTR. In 1924, Watson Sr. changed the company name from CTR to The International Business Machines(IBM).


In 1949, Watson Sr. launched the IBM World Trade Corporation near United Nations, NewYork City. The IBM World Trade Corporation managed operations in other countries. During this time, IBM machines were sold in 78 countries with sales reaching $50 million. In 1952, power changed hands when Watson Sr. stepped down for his son Watson Jr. who hadbeen once an IBM salesman. Watson Sr. passed away four years later. The late Watson’s tenure ensured that IBM was unrivaled in commercial punch card technology. However, unlike his obstinate father, Watson Jr. believed IBM’s future was in electroniccomputers, much to the company’s apprehension.

However, those doubts were soon cast aside with the construction of the SAGE (Semi-AutomaticGround Environment) system for the United States Air Force in the late-1950s. The computerized tracking system proved instrumental during the Cold War and provided an aerospacewarning to Soviet air attacks. While computer sales contributed to half of IBM's profits, Watson Jr. urged more focusedefforts towards the computer market.

His decision would be vindicated when IBM’s revenues hit $734 million at the time, morethan three times his fathers' all-time high of $214 million in 1950. During this period, IBM’s employee Arthur Samuel developed IBM’s first artificialintelligence on the mass-produced IBM 704 computer. The IBM AI could not only play a game of checkers but also learn from its own shortcomings.

In 1956, IBM manufactured and began commercialization of the IBM 350, a magnetic disk storage device. In 1957, the FORTRAN programming language was developed, creating a shift from the low-levelmnemonic-intensive assembly language. It became popular in the fields of engineering and scientific research for its ease of performingnumerical computations. In 1961, IBM developed the SABRE (Semi-Automated Business Research Environment) for the AmericanAirways.Loosely inspired by the prior SAGE, the computer reservation system SABRE became operationaland capable of automating and booking flights in a booming airline industry.

During this period, IBM developed Selectric; A line of electric typewriters that dominatedthe United States typewriting market and pioneered an age of word processors. In 1963, with a firm hold on the computer market, IBM assisted NASA in tracking orbitalflights of Mercury astronauts and provided technical support for US space explorationduring the Space Age.

In 1964, IBM developed the IBM 360 system mainframes for commercial and scientific applications. The family of mainframe computer systems became successful for two reasons; one: Solid LogicTechnology – IBM's method of packaging electronic circuitry that allowed smaller but more powerfulcomputers.Two: IBM had a range of IBM 360 models (from small to big), which left customers with optionsof either settling for smaller models or upgrade upwards without advanced programming knowledgeor external devices.

IBM engineer Forrest Barry introduced the idea of magnetic strips on plastic cards in1969. These strips were capable of storing data and would be used in credit cards, identitycards, and others. Having experienced several transitions for years, IBM's logo would settle for an 8 barlook with a blue scheme in 1972. Graphic designer Paul Rand designed the logo, which reflected IBM's nickname of "Big Blue".

In 1974, IBM engineer George Laurer developed the Universal Basic Code (UBC) barcode fortracking trade items and automating supermarket checkout systems for these items in many countries. By 1982, IBM had a 62% market share of the mainframe computer market, but deemed themicrocomputer or personal computer market as not "large enough". Despite this, it launched the PCjr, a home computer that failed to interest consumersas it was expensive and incompatible with the IBM PC software.

The product failed to compete with personal computers from the likes of Apple II, Hewlett-Packard(HP), Commodore PET and the Atari 8-bit family. After 18 months of discouraging sales, the PCjr was scrapped. By the mid-1980s, when IBM introduced the IBM PC, its competitors already had significantshares of the Personal Computer market.

 In 1993, IBM recorded their biggest loss of $8 billion due to their slow response in keepingup with their customers’ switching preferences from mainframe systems to personal computers. This led to the appointment of Louis Gesterner Jr. as IBM CEO, who believed IBM had fulfilledits vision, but all the company needed for the moment is decisiveness and a simplifiedorganization. Gerstner was able to turn around the company's belief that its mainframe market would becomeobsolete, to focus on delivering IBM processors, software and IT solutions to its customers.IBM’s revenue rose from $29 billion in 1993 to $168 billion after Gestetner's retirementin 2002.

In 2005, IBM sold their PC division to Chinese Company Lenovo, including IBM's Intel-basedserver lines, ThinkPad laptop, and tablet lines for $1.25 billion. With this deal, IBM also acquired an 18.9% shareholding with Lenovo, which would dropto about 5% three years later.

In 2009, IBM was awarded the National Medal of Technology and Innovation by former USpresident Barack Obama for developing the Blue Gene supercomputer project. Within the same year, IBM completed its acquisition of software company SPSS Inc. for $1.2 billion which was integrated into IBM as IBM SPSS. IBM continued to make improvements in the field of artificial intelligence and in 2011;the company unveiled an AI program Watson, where it won against two human opponents KenJennings and Brad Rutter in a quiz game show Jeopardy! That same year, the company celebrated its 100th anniversary on June 12. In 2012, IBM purchased Soft Layer Technologies for $2 billion. In 2014, IBM started partnering with Twitter, Facebook, Apple Inc., Microsoft, and others.


As of 2017, IBM’s subsidiaries have reached177 countries with an estimated 380,000 IBM employees worldwide.IBM is one of those companies whose employees have been awarded five Nobel Peace Prizes.

Presently, IBM is involved in the research of cloud computing, databases and artificialintelligence, while manufacturing and marketing hardware, mainframe computers, and processorchips, middleware, and software. The company has revenue of $79 billion with estimated net worth upwards of $170 billion.

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