Preface:

Since the 1950's, IBM has been synonymous with innovation, cutting-edge technology, and major league research and development. IBM pushed the boundaries of what computers were capable of doing with technology. As of the last several years, that storied legacy may be ending as IBM is sorting out its future as a company in the IT industry. IBM thinks its future, as clear as they can see it; is quite cloudy!

It would take a crowd of people to come up with the right number of fingers to match the number of marketing opportunities that your author saw the IBM Company turn over to its competitors over the years. It is inexplicable and as a stockholder, I feel it is unforgivable. Yet, IBM still turns a profit.

At a worldwide level, if IBM were ever again to become the leader in a given IT industry sub-segment, based on its track record, we could all predict with 100% accuracy the final outcome. First, after bleeding cash from the entity, Big Blue would claim that profits were not up to the company's expectations. Then, IBM would make a quick exit to conserve the company's cash reserve. The company would then bail and sell out the entire sub-industry business to whomever it could as quickly as it could. They would then express shock as the business they shed became a leader in the industry.

In 2014, IBM again executed this formula for failure. It first sold its PC x86 powerful server business to Lenovo for $2.1 billion. This is the typical IBM modus operandi. But, then Big Blue pulled a surprise in what goes down as an industry first in enabling a purchase. IBM "sold" its highly advanced Power Chip foundries for a negative $1.5 billion payable over three years.

Yes, that is correct and confirmed by IBM. You read that correctly. IBM is paying GlobalFoundries $1.5 billion in cash to take the "loss-making" unit off its hands. In the deal, IBM promises to buy its chips exclusively from GlobalFoundries and the foundry promises to make the chips for IBM's needs for the next ten years.

Who knows what the cost will be if IBM decides to leave the mainframe business; sells it off; and exits hardware completely?

Right now, TSMC, GlobalFoundries, Intel, and Samsung are the only companies in the chip industry with cutting-edge deployments. Once again, in an industry that IBM created, the IBM Company could not compete, and others will definitely prosper.

Is it not fascinating how one company can thrive off the product line leavings that another throws away. There are always companies that can run profitably what others cannot. One can legitimately ask if IBM just recently has become the company that can't or perhaps Big Blue really has been this way for a long time. Perhaps all the easy cash sources have just now dried up?

Even when the company was tops in innovation and product excellence, IBM could not hold on to major subindustries—those that it created and even those acquired such as Rolm and Satellite Business System. The IBM Company inevitably lost money in these industries, and had to sell off divisions and companies. I have concluded that IBM does everything right except for one thing: It simply does not know how to run a business in which there is both opportunity and competition.

If IBM had no mainframe product line, its staple for revenue over the years, there would not have been enough profits to sustain the company through 2015? With CEO Rometty having placed a big X (target) on hardware for dissolution within IBM, industry analysts are not sure how long even the mainframe will last. Why trust Rometty? Who knows if mainframes will even be a part of the IT landscape in another ten years? Then what for IBM?

In its formative years, IBM owned whatever IT sub marketplaces in which it chose to compete. Things were literally too good as it was so easy, IBM forgot how to compete. The magnitude of IBM's financial opportunity loss in many such instances has been staggering.

When IBM ignored obvious high potential sub-marketplaces such as the PC area, for its own reasons, more often than not, the revenues ballooned. But, the revenue was collected by other companies such as Microsoft, Intel, Phoenix Technologies, and Dell. The combined revenues of these newly formed companies became several times larger than the IBM Corporation itself.

Just looking at Intel and Microsoft for the last year—just two of many companies in the huge PC industry, the total is a staggering $150 billion and growing rapidly. Compare this with IBM's declining revenue now slipping downwards from $92.7 billion. Apple tops the charts at over $200 Billion.  

Without Intel, Microsoft alone pulled ahead of IBM in 2015 with about $94 billion, up from $77 billion in 2013. Somebody is making money—lots of money—but it is not IBM. Intel pulled in about $54 billion up slightly from 2013.

For IBM, nothing seems right. Sales are down for the 13^th quarter in a row. Big Blue brought in $6 billion less in 2014 than in 2013 and the company was down $14 billion from 2012. Thankfully for stockholders, IBM's bottom line is not yet in the red. But marketing tricks cannot promise anything sustainable for IBM's future.

The PC industry sub-segment is the one area that most industry-watchers understand. It became IBM's worst loss ever from bad management decisions and neglect.

Many programmers are fully aware that in 1980, IBM took a pile of bugs, and rewrote the Microsoft DOS PC operating system that Gates tried to say was ready to go. IBM cleaned up 300 bugs before giving it back to Bill Gates for no charge whatsoever. Gates is now the richest man in the world. Meanwhile IBM is selling off once profitable segments faster than the industry is creating new opportunities. IBM's stockholders have been shortchanged for a long time.

IBM also got snookered by Intel. Big Blue could have tied Intel up with an exclusive contract on its 8088 microprocessor for the IBM PC but again IBM executives chose to permit Intel to call the shots. Intel would not have been so greedy if IBM controlled the marketplace. Instead, they would have literally done anything to maintain the IBM contract.

IBM asked for nothing. Unbelievable! Worse than that, Big Blue gave Intel the tacit OK to sell the 8088 to all comers with no restrictions knowing IBM's PC would be the direct competitors of the newly established clone PCs. Clone company entrepreneurs were carrying loads of "IBM" cash to their banks. 

The clone makers of course owed IBM nothing and soon learned how to out-IBM, IBM. The leader in the IT Industry had forgotten how to protect its intellectual property, its assets, and its future profits. IBM forgot how to sell; or it chose not to sell. Either way, IBM lost one major product line sales opportunity after another.  

During this time, clearly IBM was not paying attention to the needs of its stockholders as its biggest sin was not protecting future stockholder opportunity for profits. Ironically, IBM showed more respect for Microsoft and Intel than for its own investors and employees.

IBM wrote many other operating systems between 1964 and 1980 and it could have written the 4,000 lines of assembler code turned over by Microsoft, in its sleep. IBM's OS/360 operating system built in 1964 checked in initially with 1 million lines of code and before it was replaced, it had grown to 10 million lines. IBM knows operating system.

Big Blue chose to ignore the prospects for substantial revenue from operating systems by making it so easy for Microsoft to win the day. The net loss for IBM for not knowing how to run its PC business, is over a trillion dollars. Think about that for a while. Let it set in.

That is what this book is all about. Think of what IBM could have been. Think of how successful IBM made IT industry technology pioneers. The stories are phenomenal because they are real and truthfully told. You won’t believe how rich everybody else in sub-industry after sub-industry has become, and I am not highlighting just the $1trillion PC area. There are many others.

From RISC computers to telecommunications, to disk drives and tape drives, to networking, to microprocessors, to minicomputers, to storage systems, to Unix, to relational database, to clones and to BIOS vendors and to various sized PCs and x86 PC servers, and on and on, IBM stockholders seem to have been the only losers while others became billionaires.

When I began to write this book over twenty years ago, I knew that I wanted to tell the true story about how IBM made a lot of brand new IT companies successful by choosing not to compete against them in the PC arena and other marketplaces. I knew there was a lot more than just the PC industry that IBM's style precluded the company from dominating. I saw it when I was an employee.

I began to write about those stories twenty years ago. But until this past summer, I had not closed them all out.  The stories were easy to find and easy to finish. I had written the facts down from the 1990's and then in the summer of 2015, I proved or disproved my suppositions and ideas through research at many levels. This book came together quickly.

Nobody can deny that the PC marketplace continues to be a $1 trillion loss to IBM's annual revenue—each and every year. It is IBM's biggest blunder but few know that it is just one of many. In industry sub-segment after sub-segment over the years, IBM failed miserably and sold-out. Ironically, IBM did so well in managing its earnings that it rarely came close to hurting itself for all of its bad decisions.

In this second edition, I added software opportunities to the list of IBM's squandering's. IBM owned the application software industry when the computer industry was in its infancy. It had little foresight into what application software would become. The prognosis for IBM by industry analysts is not promising. Without a major revenue improvement from its current $7 billion level in cloud computing revenue, the new IBM future is not going to carry the day. IBM gave up on application software years ago and does not even have a small share of this $200 Billion market. We discuss this in the new Section V in this book.

When IBM almost died at the time that John Akers was selling off plants and businesses, Lou Gerstner immediately realized the way IBM ran its hardware business was not the answer. He arrived at IBM after multi-billion dollar annual losses. Gerstner was very smart. He cleverly picked software and was able to move the company forward while reducing expenses by 60,000 employee cuts.

Gerstner saw the obvious. However, he picked middleware and expensive services, not customer application software such as IUPs, SAP, or the packages acquired by Microsoft and Oracle. Gerstner's IBM did not think that it needed to engage in the application software business at all. In fact, in his biggest mistake, Gerstner pulled the plug on a revived application software business, the linchpin of cloud computing. This huge mistake is now coming home to roost big time as companies in the cloud do not need middleware.  

That's why this book has a lot of great stories to tell you and why there is lots of interesting stuff that you can learn. Who made out the best? Who has the money? Who does not and who does owe IBM a big thank you for Big Blue's misgivings about being too successful.

IBM executives over the years from the CEO on down were all paid very well; but they seemed to understand just one aspect of IBM—its mainframe business. So they lost in just about all other marketplaces. They simply handed very crafty "entrepreneurs," the whole game. In Microsoft internal meetings, they openly mocked IBM and laughed about how gullible IBM was as a company.

In many cases, IBM executives simply gave it all away because they thought they were giving away nothing. They did not understand the opportunities, which they completely controlled. So, they held nothing back for IBM and its stockholders. IBM got no requisite share of its own successful innovations in tons of industry sub-segments. Instead, the Company unwittingly created many industry tycoons by not properly watching its assets.

The tycoons went on to become multimillionaires or billionaires. Microsoft alone has four documented billionaires on its list which is topped by Bill Gates, the richest man in the world at $79 billion. Additionally, there are over 12,000 other Microsoft employees who became millionaires. IBM paid for all of these millionaires' good fortunes out of what would have been stockholder dividends.

Considering that IBM's relationship with Microsoft started by IBM accepting a dirty OS that Microsoft had not even written itself, and then IBM rewrote this operating system to remove over 300 bugs for Bill Gates and Big Blue took nothing in return, one can see what a major disservice IBM executives of this era did for the company's future and the stockholders share value.

In Chapter 1, your author presents the list of most of the billionaires and millionaires who benefitted from IBM's lack of prudence. It is a very long list. I wonder if any of these folks have ever called up the IBM Company just to say thank you.

Is IBM a Poorly Run Company?

The biggest story is about Microsoft and IBM and the PC. But there are many other stories. There are so many that IBM should be embarrassed.  Your author tells the essence of the full Microsoft / IBM story along with many other stories of IBM squandering real opportunities. You will enjoy the intrigue in these stories and the stories themselves. It may even cross your mind that no company executives could have consistently made such poor decisions without being part of a conspiracy to defraud the IBM Company. Could this have been? I do not think so. But it would make a good movie.

Industry analysts, however, who have never loved IBM, and have never been employed by IBM are making noises to suggest that perhaps IBM is simply a poorly run company, and that makes the analysis very simple. This surely shines a negative light on IBM's current management and past management back to the Watson era.

In January, 2015 a group known as 24/7 Wall Street declared IBM as the worst run company in America. This is the criteria they used. You make the call:

"In order to be considered truly poorly run, a company must have a track record of missed opportunities, mismanaged risks, poor operational decisions or executive malfeasance. In short, a company must demonstrate a pattern of decision-making that calls into question the ability of its management and directors to adequately provide returns to shareholders."

What would 24/7 Wall Street think about a company whose shareholders benefitted very little while the employees of its competitors—as many as 15,000, became millionaires and multimillionaires—and the executives of its competitors—as   many as 90—became billionaires and multibillionaires.

These lucky people gained their fortunes as a direct result of IBM's poor executive decision making in dealing with non-mainframe sub-industries.

If IBM were not so poorly run over the past thirty-five years with the exception of the Gerstner years, one might even accuse executives at Big Blue of malfeasance. How else can we explain stockholders being shortchanged a trillion dollars a year in lost PC sub-industry revenue?

But, to be fair, nobody has ever suggested IBMers on the front line or at the top desks ever took bribes from Microsoft or Intel or Compaq or Phoenix Technologies or anybody. There are no reports of IBM executives shortchanging the company for their own enrichment. The simple truth appears to be that IBM just blew it.

You'll love this book.

Where we have taken the reader in this Preface is more of a primer than a peek, I hope that we have proven that you are going to love this book. It is designed by an IBM insider and told with respect for IBM and with the truth that all of these great stories deserve. You will not want to put this book down.

Brian W. Kelly, my dad, not only gives the facts about how these billionaire entrepreneurs made their fortunes; he shows which IBM executives gave way the store. Kelly lived through these days and saw it unfold at IBM and in the industry.  He knows what he is talking about. Kelly also provides a rich history lesson about the entire computer industry that will capture your imagination.

The book begins with the introduction of the first computer and it takes you on a ride through all of the major events that occurred during each IBM CEO's tenure. The story thus begins with Thomas Watson Sr, as CEO and continues with son, Thomas Jr. as CEO. The book then progresses section by section and chapter by chapter to the state of the computer industry today. Kelly does it all in 57 easy-to-read, highly enjoyable chapters.

Few books are a must-read but ThankYou,IBM. will quickly be at the top of your list and America’s most read list.

Who is Brian W. Kelly?

Brian Kelly is one of the leading authors in America with this his 62^nd published book. He continues to be an outspoken and eloquent expert on IT topics. Of his 62 books, Kelly has written over thirty books and several hundred articles on IT topics that either teach technology or they tell a story about technology.

Brian has been writing books and articles for more than thirty years and he has many great books to his credit.

He also writes patriotic books and some of these include: Saving America; Taxation without Representation; Jobs! Jobs! Jobs!; The Constitution 4 Dummmies!; America 4 Dummmies! -- as well as many others. Kelly's books are highlighted at many web site sales sites including www.letsgopublish.com. They are also for sale at www.bookhawkers.com 

Enjoy and please tell others about your enjoyment!

The best!

Sincerely,

    Brian P. Kelly, Editor in Chief