IBM TRIES TO SHOW IT'S DIFFERENT

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The personal computer line that IBM Corp. unveils today offers standard-issue Microsoft Windows software, Intel brand chips and clone prices.

But IBM is spending $100 million on worldwide advertising this quarter to promote a not-so-obvious theme: "There is a difference."

For now, the claim may be a bit hard to justify based on products. However, the computer marketer is piecing together a complex strategy it hopes will create a difference.

That move is destined either to put IBM back in control or to so befuddle Big Blue and customers that the market will stick with more-focused rivals like Intel Corp. in chips, Microsoft Corp. in software and Compaq Computer Corp. in PCs.

The campaign breaks as IBM and Apple Computer are talking about ways to create a PC that could run Apple's Macintosh and Microsoft's Windows software and IBM's OS/2 operating system. Reports have been flying that IBM and/or Motorola will invest in Apple or buy the company outright. All three are working together on PowerPC, a chip line created to counter Intel.

An IBM purchase of Apple would make strategic sense (AA, July 11). The two are already partners on various ventures, including an effort started early this decade to create yet one more operating system standard.

But for now, IBM needs to resolve issues like shortages of key products and market uncertainty about where the company is going in technology and alliances.

"We're really trying to do [a wholesale revamping] as fast as we can in every dimension," said G. Richard Thoman, the IBM senior VP who oversees the PC business. "There may be a little bit of breakage"-or turmoil-"as a result of it."

Some analysts are giving Chairman Louis V. Gerstner Jr. the benefit of the doubt. "IBM is on the road to recovery," said David Goldstein, president of Channel Marketing Corp., a Dallas market research company. "They're just taking the scenic route."

IBM's strategy, for better or for worse, is to hedge on multiple technologies, letting the market pick the winners.

What a difference a decade makes for IBM, which fell to fourth in U.S. PC sales for the first half of this year. IBM created the industry standard in 1981 by picking Microsoft software and Intel chips for the original IBM PC.

"My sense is IBM's just playing all the bets," said PC World Publisher Rich Marino.

The new IBM machines have a sleek industrial design and some clever features, such as the ability to diagnose and fix internal problems by modem, but otherwise aren't radically different from rivals.

IBM contends it does have a difference in superior quality and customer service, and the new TV campaign from Ogilvy & Mather Worldwide, New York (AA, Oct. 10), plays up those themes.

The business line being introduced today-the IBM Personal Computer 300 and 700 Series-and the Aptiva home PC line unveiled late last month use Intel chips and Microsoft Windows.

IBM will continue to sell old models, like PS/2 and ValuePoint, next to new ones through the first quarter, confusing attempts to streamline its product lineup.

IBM's software division will spend $50 million this quarter to try to establish OS/2 Warp, a new version of its long-struggling OS/2 software, as an alternative to Windows. IBM is expected to install Windows and OS/2 on many of its business PCs later this year and on its consumer models next year.

"We're the underdog," a software division spokeswoman said. "People like to see the underdog succeed."

But that's not necessarily true. In computers, customers tend to go with the technology and companies that have momentum, and in software that means Microsoft.

"The installed base wins," Mr. Marino said, meaning PC users will be reluctant to switch. That would give the edge to Windows 95, due out next year.

Even some IBM insiders acknowledge confusion about their company's software strategies.

The chip strategies are hard to make sense of, as well. IBM next year will introduce its first personal computers run on PowerPC. But IBM is putting Intel's flagship Pentium in its new top-of-the-line PCs and forming alliances with Intel clone rivals like Cyrix Corp.

IBM must execute and communicate a strategy to pull all the technology pieces together if it is to win. If IBM succeeds, all this confusion will give way to an IBM PC a few years from now that could run any type of software.

But IBM's comeback can't be decided this quarter, even with record ad spending. "This is not," Mr. Thoman said, "a one-quarter fix."

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