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History of IBM (year) 

IBM original logoAlthough IBM was incorporated in the state of New York on June 16, 1911 as the Computing- Tabulating- Recording Company (C-T-R), its origins can be traced back to developments at the close of the 19th century. For example, the first dial recorder was invented by Dr. Alexander Dey in 1888, and Dey's business became one of the building blocks of C-T-R. Similarly, the Bundy Manufacturing Company was incorporated in 1889 as the first time recording company in the world, and it, too, later became a key component of C-T-R.

A U.S. government agency requirement late in the 19th century led directly the development of one of the company's principal lines of business. During the height of the Industrial Revolution, when the United States was receiving waves of new immigration, the U.S. Census Bureau recognized that its traditional counting methods would be inadequate for measuring the expanding population. As a result, the Bureau sponsored a contest to find a more efficient means of tabulating census data. The winner was Herman Hollerith, son of a German immigrant and Census Bureau statistician, whose Punch Card Tabulating Machine used an electric current to sense holes in punched cards and keep a running total of data. Capitalizing on his success, Hollerith formed the Tabulating Machine Company in 1896.

The first decade of the 20th century was marked by a number business launches and consolidations, all of which eventually led to the formation of the Computing- Tabulating- Recording Company (C-T-R) - IBM's predecessor - in 1911.

For example, the International Time Recording Company (ITR) wasformed in 1900 and the Computing Scale Company of America was incorporated in 1901 - and these two businesses were two of the three chief components of C-T-R a decade later. ITR itself acquired other companies, such as the Dey Time Register Company, during this period, broadening the time recording equipment product line.

In addition, ITR outgrew its original manufacturing facilities, and built a modern factory in Endicott, New York, on the site of what later became an IBM Plant No. 1.

Based in New York City, the company had 1,300 employees and offices and plants in Endicott and Binghamton, New York; Dayton, Ohio; Detroit, Michigan; Washington, D.C.; and Toronto, Ontario.

In 1911, Charles F. Flint, a noted trust organizer, engineered the merger of Hollerith's Tabulating Machine Company with two others - Computing Scale Company of America and International Time Recording Company. The combined Computing- Tabulating- Recording Company (C-T-R) manufactured and sold machinery ranging from commercial scales and industrial time recorders to meat and cheese slicers, along with tabulators and punched cards.

When the diversified businesses of C-T-R proved difficult to manage, Flint turned for help to the former number two executive at the National Cash Register Company, Thomas J. Watson, Sr. In 1914, Watson, then age 40, joined the company as general manager.

Drawing upon his sales experience at NCR, Watson implemented a series of effective business tactics: generous sales incentives, a focus on customer service, an insistence on well-groomed, dark-suited salesmen and an evangelical fervor for instilling company pride and loyalty in every worker. Watson boosted company spirit with employee sports teams, family outings and a company band. He preached a positive outlook, and his favorite slogan, "THINK," became a mantra for C-T-R's employees. Within 11 months of joining C-T-R, Watson became its president. The company focused on providing large-scale, custom-built tabulating solutions for businesses, leaving the market for small office products to others. During Watson's first four years, revenues more than doubled to $9 million. He also expanded the company's operations to Europe, South America, Asia and Australia.

In the years following World War I, C-T-R's engineering and research staff developed new and improved mechanisms to meet the broadening needs of its customers. In 1920, the company introduced the lock autograph recorder, the first complete school time control system, and launched the Electric Accounting Machine. In 1921, the company acquired the business of the Ticketograph Company of Chicago, and certain patents and other property of the Peirce Accounting Machine Company. The Carroll Rotary Press was developed in 1924 to produce cards at high speed, and punched card capacity was doubled.

The growth and extension of C-T-R's activities made the old name of the company too limited, and, on February 14, 1924, C-T-R's name was formally changed to International Business Machines Corporation. By then, the company's business had expanded both geographically and functionally, including the completion of three manufacturing facilities in Europe.

During the Great Depression of the 1930s, IBM managed to grow while the rest of the U.S. economy floundered. Thomas J. Watson, Sr., took care of his employees. IBM was among the first corporations to provide group life insurance (1934), survivor benefits (1935) and paid vacations (1937).

While most businesses had shut down, Watson kept his workers busy producing new machines even while demand was slack. Thanks to the resulting large inventory of equipment, IBM was ready when the Social Security Act of 1935 brought the company a landmark government contract to maintain employment records for 26 million people. It was called "the biggest accounting operation of all time," and it went so well that orders from other U.S. government departments quickly followed.

Watson created a major division in 1932 to lead the engineering, research and development efforts for the entire IBM product line. The following year, IBM completed one of the finest modern research and development laboratories in the world at Endicott, New York.

Similarly, the IBM Schoolhouse was also completed at Endicott in 1933 to provide education and training for employees. That same year saw the addition of an entirely new product unit - the Electric Writing Machine Division - to IBM's organization. In 1935, IBM launched a new line of business with the introduction of the International Proof Machine.

When World War II began, all IBM facilities were placed at the disposal of the U.S. government. IBM's product line expanded to include bombsights, rifles and engine parts - in all, more than three dozen major ordnance items. Thomas Watson, Sr., set a nominal one percent profit on those products and used the money to establish a fund for widows and orphans of IBM war casualties.

The war years also marked IBM's first steps toward computing. The Automatic Sequence Controlled Calculator, also called the Mark I, was completed in 1944 after six years of development with Harvard University. It was the first machine that could execute long computations automatically.

Over 50 feet long, eight feet high and weighing almost five tons, the Mark I took less than a second to solve an addition problem but about six seconds for multiplication and twice as long for division - far slower than any pocket calculator today. Later in the decade, IBM introduced the Selective Sequence Electronic Calculator (1948) as the company's first large-scale digital calculating machine, the successful 604 Electronic Calculating Punch (1948) - 5,600 of which were built in a 10-year period - and the Card-Programmed Electronic Calculator (1949), the first IBM product designed specifically for computation centers.

IBM made a number of key technological changes in the decade of the 1950s. In 1952, the company introduced the IBM 701, its first large computer based on the vacuum tube. The tubes were quicker, smaller and more easily replaced than the electromechanical switches in the Mark I (1944). The 701 executed 17,000 instructions per second and was used primarily for government and research work. But vacuum tubes rapidly moved computers into business applications such as billing, payroll and inventory control. By 1959, transistors were replacing vacuum tubes.

The IBM 7090, one of the first fully transistorized mainframes, could perform 229,000 calculations per second. The U.S. Air Force used the 7090 to run its Ballistic Missile Early Warning System. IBM led data processing in a new direction with the 1957 delivery of the IBM 305 Random Access Method of Accounting and Control (RAMAC), the first computer disk storage system. Such machines became the industry's basic storage medium for transaction processing. In less than a second, the RAMAC's "random access" arm could retrieve data stored on any of the 50 spinning disks. At an IBM exhibit at the 1958 World's Fair in Brussels, the RAMAC answered world history questions in ten languages. Also in 1957, IBM introduced FORTRAN (FORmula TRANSlation), a computer language based on algebra, grammar and syntax rules. It became one of the most widely used computer languages for technical work.

A new generation of IBM leadership oversaw this period of rapid technological change. After nearly four decades as IBM's chief executive, Thomas J. Watson, Sr., passed the title of president on to his son, Thomas J. Watson, Jr., in 1952. He became chief executive officer just six weeks before his father's death on June 19, 1956 at age 82.

Just as his father saw the company's future in tabulators rather than scales and clocks, Thomas J. Watson, Jr., foresaw the role computers would play in business, and he led IBM's transformation from a medium-sized maker of tabulating equipment and typewriters into a computer industry leader.

Under Thomas J. Watson, Jr., there were also innovations in marketing. In 1969, IBM changed the way it sold technology. Rather than offer hardware, services and software exclusively in packages, marketers "unbundled" the components and offered them for sale individually. Unbundling gave birth to the multibillion-dollar software and services industries, of which IBM is today a world leader.

On April 7, 1964, IBM introduced the System/360, the first large "family" of computers to use interchangeable software and peripheral equipment. It was a bold departure from the monolithic, one-size-fits-all mainframe. Fortune magazine dubbed it "IBM's $5 billion gamble."

System/360 offered a choice of five processors and 19 combinations of power, speed and memory. A user could operate the same magnetic tape and disk products as another user with a processor 100 times more powerful. System/360 also offered dramatic performance gains, thanks to Solid Logic Technology - half-inch ceramic modules containing circuitry far denser, faster and more reliable than earlier transistors.

The 1970s saw the end of more than a half-century of Watson family leadership. Thomas J. Watson, Jr., stepped down as CEO in 1971. After an interim period of leadership by T. Vincent Learson, Frank T. Cary took over the company in 1973. Watson served as U.S. ambassador to the Soviet Union from 1979 to 1981 and remained a member of IBM's board of directors until 1984. He died in 1993 at the age of 79.

During Cary's tenure, the computer industry expanded and wove its way into everyday life. The floppy disk, introduced in 1971, became the standard for storing personal computer data. When people shopped for groceries, IBM's supermarket checkout station, introduced in 1973, used glass prisms, lenses and a laser to read product prices. Also in 1973, bank customers began making withdrawals, transfers and other account inquiries via the IBM 3614 Consumer Transaction Facility, an early form of today's Automatic Teller Machines.

The appointment of John R. Opel as CEO in 1981 coincided with the beginning of a new era in computing. Thanks to the birth of the IBM Personal Computer or PC, the IBM brand began to enter homes, small business and schools.

Though not a spectacular machine by technological standards, the IBM PC brought together all of the most desirable features of a computer into one small machine. It offered 16 kilobytes of user memory (expandable to 256 kilobytes), one or two floppy disks and an optional color monitor. When designing the PC, IBM for the first time contracted the production of its components to outside companies. The processor chip came from Intel and the operating system, called DOS (Disk Operating System) came from a 32-person company called Microsoft.

John F. Akers became CEO in 1985 and focused on streamlining operations and redeploying resources. During Akers' tenure, IBM's significant investment in research produced four Nobel Prize winners in physics, achieved breakthroughs in mathematics, memory storage and telecommunications, and made great strides in expanding computing capabilities.

The IBM token-ring local area network, introduced in 1985, permitted personal computer users to exchange information and share printers and files within a building or complex. With the further development of the computer, IBM laid a foundation for network computing and numerous other applications.

During the 1980s and early 1990s, IBM was thrown into turmoil by back-to-back revolutions. The PC revolution placed computers directly in the hands of millions of people. And then, the client/server revolution sought to link all of those PCs (the "clients") with larger computers that labored in the background (the "servers" that served data and applications to client machines).

Both revolutions transformed the way customers viewed, used and bought technology. And both fundamentally rocked IBM. Businesses' purchasing decisions were put in the hands of individuals and departments - not the places where IBM had long-standing customer relationships. Piece-part technologies took precedence over integrated solutions. The focus was on the desktop and personal productivity, not on business applications across the enterprise. By 1993, the company's annual net losses reached a record $8 billion. Cost management and streamlining became a chief concern. And IBM considered splitting its divisions into separate independent businesses.

Louis V. Gerstner, Jr. arrived as IBM's chairman and CEO on April 1, 1993. For the first time in the company's history IBM had found a leader from outside its ranks. Gerstner had been chairman and CEO of RJR Nabisco for four years, and had previously spent 11 years as a top executive at American Express.

Gerstner brought with him a customer-oriented sensibility and the strategic-thinking expertise that he had honed through years as a management consultant at McKinsey & Co. Soon after he arrived, he had to take dramatic action to stabilize the company. These steps included rebuilding IBM's product line, continuing to shrink the workforce and making significant cost reductions. Despite mounting pressure to split IBM into separate, independent companies, Gerstner decided to keep the company together. He recognized that one of IBM's enduring strengths was its ability to provide integrated solutions for customers - someone to represent more than piece parts or components. Splitting the company would have destroyed a unique IBM advantage.

With the rise of the Internet and network computing the company experienced another dramatic shift in the industry. But this time IBM was better prepared. All the hard work IBM had done to catch up in the client/server field served the company well in the network computing era. Once again, customers were focused on integrated business solutions - a key IBM strength that combined the company's expertise in solutions, services, products and technologies. In the fall of 1995, delivering the keynote address at the COMDEX computer industry trade show in Las Vegas, Gerstner articulated IBM's new vision - that network computing would drive the next phase of industry growth and would be the company's overarching strategy. That year, IBM acquired Lotus Development Corp., and the next year acquired Tivoli Systems Inc. Services became the fastest growing segment of the company, with growth at more than 20 percent per year.

In May 1997, IBM dramatically demonstrated computing's potential with Deep Blue, a 32-node IBM RS/6000 SP computer programmed to play chess on a world class level. In a six-game match in New York, Deep Blue defeated World Chess Champion Garry Kasparov. It was the first time a computer had beaten a top-ranked chess player in tournament play, and it ignited a public debate on how close computers could come to approximating human intelligence. The scientists behind Deep Blue, however, preferred to stress more practical concerns. Deep Blue's calculating power - it could assess 200 million chess moves per second - had a wide range of applications in fields calling for the systematic exploration of a vast number of variables, among them forecasting weather, modeling financial data and developing new drug therapies.

As the decade drew to a close, IBM stood on the threshold of the new century having reestablished itself as a leading information technology innovator. Its leadership helped create the e-business revolution. And it had successfully transformed itself, achieving an impressive business turnaround. As the new century opened, IBM moved confidently into a future it helped create, one that is linked to the ubiquitous and surging presence of the global networks that are connecting every computer, and soon perhaps, every electronic device in the world.

The decade begins with a Y2K-related drop-off in customer demand and the collapse of the dot-coms. If 2000 is seen as a watershed for e-business, 2001 is the year the world's established enterprises awake to its true possibilities -- and information technology requirements. In addition, IBM debuts a new generation of servers -- the eServer -- for meeting entirely new, unprecedented demands on the underlying infrastructure supporting e-business.

The 2000's are also marked by a transition in IBM's leadership. Samuel J. Palmisano becomes president and chief operating officer in 2000 and then, two years later, he is named chief executive officer of IBM. As CEO, Palmisano succeeds Louis V. Gerstner, Jr., who remains IBM chairman through 2002.

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