|According to the recent onslaught of television ads, IBM would
like for all of its customers to be ready for e-business. But is IBM itself
ready enough for the Internet age?
A few quotes from the IBM history timeline
When Apple Computer successfully pioneered its way
into the consumer market with the introduction of the Apple II series of entry-level
machines, IBM, adjusting from decades of manufacturing
business mainframes, successfully answered back in the early 1980s with its own
personal computers that remain the industry standard.
When Microsoft launched its attempt to be a
dominant force in the PC Operating System market with MS-DOS and subsequently Windows, IBM
responded with OS/2 and OS/2 Warp, which while lauded by programmers,
failed due to limited utilization of vast promotional resources under an avalanche of
marketing efforts by Microsoft. To this day, it is still unknown exactly how a small
company powered by a young William Gates first won the order to provide the operating
system for the IBM PC family and a few years later was successful in toppling the industry
giant in its own arena. IBM was eventually forced to discontinue work on OS/2, after
billions of dollars were spent in its development
In the mid-1990s, following Netscape Communications
introduction of its Navigator web-browsing software, IBM did nothing to
increase its presence in this fast-growing area. While Microsoft clearly feared for its
future life, and began development on a competitor to Netscapes Navigator in
Internet Explorer, IBM totally failed to enter the Browser War, instead
choosing to sit back and passive watch the proceedings. While about 3 years ago Gates
declared that Microsofts next venue of attack was the entire World Wide Web, IBM
again remained quiet, although it is again still unclear why...
Partly the result of Microsofts charge into this field, and a near-monopoly on
word processing, office productivity suites and operating systems, it is Microsoft who
leads in Web influence among top
computer companies, not IBM. Microsofts market capitalization to sales ratio
(27:1) has become incomparably higher than IBMs (2.1:1), bringing Gates' empire in
line with Internet-related stocks that have seen their market capitalization rise
dramatically. IBMs market capitalization clearly depends mainly on traditional
models including Earnings Per Share and quarterly sales for the companys valuation,
hardly signs that the company is being taken seriously as a future Internet power ready
Stocks of Internet-related companies have been the darlings of Wall Street for the past
two years, as companies with low or negative sales margins are given market values
comparable to traditional companies that have dramatically higher sales and earnings
levels. The argument is that while traditional companies are evaluated on their
year-to-year revenue and earnings growth, Internet-related companies, including AOL, Cisco Systems and
to a degree, Microsoft, are rated primarily on their potential for growth in future
e-commerce-dominated market, not only their current level of sales and earnings.
One of the brightest examples to what we have tried to clarify is the investors
reaction to IBMs most recent
quarter report announced January 21st. IBM announced another consistent level of
sales, posting $25.1 billion in sales in the fourth quarter of 1998, six percent higher
than the previous year. Earnings were in excess of $2 per share.
Did IBM stock
jump on this impressive news? Hardly. The stock instead fell significantly, nearly ten
percent, the day after the reports publication, based on investors
expectations that were not met by traditional criteria. So it appears that investors
apparently do not yet have enough reasons to apply Internet market criteria to IBM-related
IBM may continue to tell other companies to join e-business, and increase
their levels of Web influence. But IBM cannot be considered among the lofty ranks of
Internet companies until they begin to demonstrate a real effort to increase their own Web
influence levels, at least to the level that Gates promised investors more than three
Meanwhile, IBMs CEO, Louis Gerstner, continues to keep his thoughtful silence...
Wall Street does not yet consider IBM a true force on the
Internet, and our own research into this level has shown IBM to be only
sixth among the top 100 computer-related companies now.
If IBM continues to ignore the Internet, it appears that the
company currently sitting in first place in Web influence, Microsoft, may soon catch IBM
This is a proposition IBM should fear with its life as an IT
industry leader, unless of course to give Microsoft the #1 position has been IBM's
unspoken goal for the last twenty years...