Dominance Ended, I.B.M. Fights Back
By Sandra Salmans
The New York Times
January 9, 1982
In agreeing to drop its antitrust suit against the International Business Machines Corporation, the Department of Justice has recognized what computer experts and securities analysts had long since concluded: I.B.M. no longer dominates the computer business.
The company, known as the ''colossus of Armonk,'' has lost momentum and sales to a host of established rivals and upstarts in the United States, and now faces a serious challenge from Japan.
''In the last 10 years, there have been many new entrants and I.B.M. has lost market share,'' said William Easterbrook, a computer analyst with Kidder, Peabody & Company Inc. ''To make a case on the basis that I.B.M. is stifling competition is totally absurd.''
At the same time, however, experts in the computer field say that of late, I.B.M. has become increasingly competitive in technology and pricing, and they predict that the company will improve its market share in many areas of office technology.
More Aggressive Posture
''In the last four years, I.B.M. has been more aggressive,'' said Gideon Gartner, president of the Gartner Group, a Stamford, Conn., firm specializing in the computer industry. ''And it will become even more so, starting next Monday.''
In the 13 years since the Government brought its suit, I.B.M.'s share of the main-frame computer market slipped to 62 percent, from 70 percent, according to Howard Anderson, the president of the Yankee Group, a computer and telecommunications consulting company in Cambridge, Mass. I.B.M. lost business to Digital Equipment, Data General, Prime Computer, Wang Laboratories, Amdahl, Hewlett-Packard, Honeywell and Control Data, as well as to some aggressive, price cutting Japanese companies.
During that time, I.B.M. lost its technological edge, concluded Mr. Easterbrook, who attributed its decline to a heavy dependence on leasing equipment during the 1970's. ''This reduces the incentive to pass on to customers the latest advances in technology, as it would mean better technology at lower cost,'' he said.
Slow on Small Computers
Meanwhile, I.B.M. was slow to enter the fast-growing small computer field, analysts say, and sacrificed market share to upstarts such as Prime Computer, Apple and Radio Shack. In the last five years, Mr. Gartner noted, some of those newcomers increased their revenues fivefold, to $3 billion or more, while I.B.M.'s sales had less then doubled.
Mr. Anderson faults I.B.M. on two other grounds. One mistake was allowing other computer manufacturers to bring out so-called plug compatible equipment, which can run on I.B.M. software, he said. Another error was to adhere to centralized data-processing systems and to resist ''distributed processing,'' with decentralized small computers.
In the last few years, however, I.B.M. has acted to rectify both problems, he added. Its newly developed Systems Network Architecture has become ''the standard for the computer industry,'' said Mr. Anderson, who jokingly refers to it as the ''System for Negating Alternatives'' from I.B.M.'s competitors. The system ''is I.B.M.'s strategy, for mainframe and peripherals, in the 1980's and 1990's,'' he said.
Lower Prices Cited
Another measure of the more aggressive posture being taken by I.B.M. is its recent enthusiasm in plunging into the small-computer field. ''A major change at the company, in the last few years, has been its willingness to come in and compete for products down to the $1,000 to $2,000 level,'' Mr. Easterbrook said.
I.B.M. has been competing not only by introducing new equipment but also with low prices, he added. When I.B.M. announced its entry in the personal computer field a few months ago, the $3,000 to $5,000 was considered highly competitive. The Displaywriter, an office word-processor introduced in mid-1980, was even more attractively priced, at levels below those already on the market.
''Before 1980, I.B.M. never introduced a product at a price below the competition,'' Mr. Easterbrook said. ''The company has taken the gloves off.''
The company's tough new posture has already scored points. In the last year, I.B.M.'s order patterns have been significantly better than its competitors, according to Mr. Easterbrook, although he predicted that its computer market share will eventually level off at 60 percent to 65 percent.
Entering New Markets
Mr. Anderson, who projects that share at 70 percent, also predicts that that I.B.M. will be entering entirely new markets, such as robotics.
The company will open a check-processing service bureau in Tampa, Fla., in the next two months, he added. A spokesman for I.B.M., Peter Kuhn, refused to comment on specific developments, but noted that I.B.M. has always said that it would eventually get into the service bureau business.
For all its newfound competition, Mr. Anderson said, ''We expect I.B.M. to increase market share, enter new markets and find new channels of distribution, such as Sears. In the 1980's,'' he said, ''every office manager will have access to computer power, and I.B.M. will lead them into this brave new world.''
Illustrations: table of I.B.M. at a glance
Copyright 1982 The New York Times Company