IBM's influence on the development of Soviet IT. IBM: one hundred years of great history
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IBM is one of the world's largest manufacturers and suppliers of hardware and software. The company has existed for more than a hundred years, and throughout this period it has led technological progress. Thanks largely to it, we have magnetic stripe cards, hard drives and personal computers.
We'll talk about US air defense, the first programmable computer, alternative uses of manufacturing facilities (for rifles), the first mass-produced IBM PCs, the ThinkPad line of laptops, and inventions that have become part of our lives for many years to come.
The invention of the electrical tabulation system allowed Hollerith to speed up the process of counting the census results. If it took eight years to count in 1880, then in 1890, thanks to the tabulator, the bureau took one year to do it. After the US Census, Hollerith was promoted to professor at Columbia University. Over the following years, his invention was used to conduct censuses in several countries, including Austria, Canada, Italy and France. Realizing the potential of his invention, Hollerith opened the Tabulating Machine Company in 1896. TMC sells its cars to railway companies, government agencies, and conducts international trade.
In Russia until late XIX centuries there was no accurate population data. These figures are important for the state, at least in order to calculate the number of citizens liable for military service, as well as for solving a host of other issues of governing the country.
In August 1895, the director of the Center of the Statistical Committee N.A. Troinitsky in Bern, at a session of the International Statistical Institute, presented to his colleagues the Regulations on the general census in Russia planned for 1897. Hollerith also spoke at this session. A year after this meeting, Hollerith was invited to Russia to sign a contract and conduct a census. The Tabulating Machine Company, which Hollerith opened in 1896, leased 35 previously used machines to Russia and sold 70 tabulators with sorting machines and 500 punches. To reduce the cost of transporting equipment, some parts were produced locally, in St. Petersburg.
The complete set consisted of one tabulator, which summarized the signs of the same name, thirty punchers for preparing punched cards, and two sorting machines for grouping cards. Census forms were sent to headquarters, to in this case to the Center for Statistical Control Russian Empire. More than two and a half thousand people worked here in several departments. In the marking one, the code of the sign was placed opposite the answers, in the checking one, they checked whether an error had occurred, and in the punching one, the codes were transferred to punched cards, each of which corresponded to one person. The last department, the machine department, carried out calculations using tabulators and sorting machines. Here the results were tallied and the punch cards were grouped. Unfortunately, in Russia the census took eight years due to the negligence of some of the people in charge of the process.
The last tabulator that was used during the census in the Russian Empire. Photo: Polytechnic Museum
In 1901, in parallel with TMC, the Computing Scale Company was opened in the USA, producing scales. These scales made life easier for sellers, allowing them to quickly calculate the cost of goods. The third “pillar” of the corporation was the International Time Recording Company, a manufacturer of time tracking systems.
All three companies were merged on June 16, 1911 to form Computing Tabulating Recording. She sold scales, time tracking devices, and punchers for marking punch cards. The person responsible for the merger was American businessman Charles Ranlett Flint. He bought TMC for US$2.3 million, of which Herman Hollerith received US$1.2 million.
In 1914 he took office general director Thomas Watson joined, and the company began to specialize only in large tabulating machines.
The company slogan was the word “Think”. During Watson's four years, the company's revenues doubled to $9 billion. The company actively worked with Europe, South America, Asia and Australia. In 1924, the company was renamed again - CTR changed its name to International Business Machines. The range is expanding, but electric tabulators remain the main product for many years. Their company produced and sold until 1976. IBM tabulators were also used in the USSR.
For many years, IBM has worked with both government agencies and businesses. Government orders allowed the company, even during the Great Depression of 1935-1939, to pay salaries to employees and continue research. During the war production sites IBM was busy with weapons - the company produced the M1 carbine and the Browning automatic rifle.
Technology giant IBM was at the forefront of personal computers. It all started, of course, not with ThinkPad laptops, but with the Mark I. This computer is considered the first American programmable computer. It was built in 1941. The developers, led by US Navy Captain 2nd Rank Howard Aiken, an IBM engineer, used the work of Charles Babbage.
The computer, assembled from 765,000 parts, reaches a length of 17 meters and a height of 2.5 meters. The car weighs 4.5 tons. Engineers used 800 kilometers of wires. Every second the machine could perform three addition or subtraction operations. Multiplication took 6 seconds and division took 15.3 seconds. The huge machine replaced twenty operators with adding machines.
One of the major government contracts was work on the SAGE missile defense system. In 1949, the US military was confident that the Soviet Union had bombers that could fly over the North Pole and deliver a bomb to the very center of the country. The Americans received such intelligence data after the USSR tested its first nuclear bomb. The country needed an early warning system, but the air defense at the time collected data from radar systems manually.
To remedy the situation, in 1950 the US Air Force awarded a contract to MIT to conduct air defense research and develop a prototype system. The result of the work was the SAGE (Semi-Automatic Ground Environment) system, which means “semi-automatic ground environment”.
The basis of the system was the AN/FSQ-7, or XD-1 computers. Their production was taken over by IBM, earning $500 million over the course of the project. The project employed up to 8,000 employees, that is, 25% of the company's total workforce. Although IBM could have worked on software, the company did not undertake this: it was simply unclear where 2,000 programmers could be put after the end of the project.
The system was controlled by up to 100 operators, and up to 24 headquarters were located throughout the country. Digitized data was displayed on the screens, which the operator worked with using a light pen. The XD-1 weighed 250 tons, consumed 3 megawatts of electricity and had 49,000 lamps in its design. Every second, the XD-1 computer performed up to 75 thousand operations, which is tens of times higher than analogues of that time.
The SAGE system operated until 1983.
In 1956, Thomas Watson's son, Thomas Watson Jr., took over as head of IBM. The company focused on the development and production of computers and software. A team led by John Backus developed the world's first programming language between 1954 and 1957. high level, which has a translator and was subsequently developed until today - FORTRAN. This language helped the company increase computer sales: it made working with them more “friendly” for users.
The first language standard was developed in 1966 and was named Fortran 66. In 1977, the Fortran 77 standard was released. Fortran 90 appeared in 1991. Fortran 95 was created in 1997. Today, the latest version of the language standard is Fortran 2008.
Punch card for FORTRAN language
If we talk about supercomputers, then in 2016 IBM with Sequoia and Mira occupies the fourth and sixth positions in the TOP 10.
In 2005, Lenovo bought IBM's personal PC division for $1.25 billion and became the third largest company in this market. In 2012, Lenovo took first place in the supply of personal computers thanks to the purchase of IBM's computer business. In September 2014, IBM sold its x86 server business. Add tags
IBM(pronounced IBM; MFA: ; abbr. from English International Business Machines) is an American company headquartered in Armonk (New York), one of the world's largest manufacturers and suppliers of hardware and software, as well as IT services and consulting services.
A common nickname for the company is Big Blue, which can be translated from English as “big blue” or “blue giant”. There are several versions regarding this nickname. According to one of them, the name comes from the mainframes supplied by the company in the 1950s - 1960s. They were the size of a room and were blue in color. Another theory is that the nickname simply refers to the company logo. According to another version, this name comes from the company’s former dress code, which required many employees to wear blue shirts and suits.
Story
1888-1924: IBM founded
In 1890, a census was taken across the United States. To process its results, the “electric tabulator” invented by Herman Hollerith was first used. Thanks to him, the census data was processed in just a year, whereas the previous census of 1880 took 8 years to process. Encouraged by his success, the inventor opened the Tabulating Machine Company in 1896.
In 1924, with entry into the Canadian market and expansion of the product range, CTR changed its name to International Business Machines or, for short, IBM.
1930s - 1940s
In 2001, IBM donated $3,000,000 to the Holocaust Victims Compensation Fund for supplies to Germany of machines for recording concentration camp prisoners.
1950s - Air Force and airline projects
In the 1950s, the company created a large computerized missile defense system, SAGE, which analyzed data from radars in real time and provided interceptor targeting. Used from the 50s to the 80s of the XX century. In later versions, the system made it possible to automatically direct aircraft to intercept, transmitting data directly to their autopilots.
Computer era
In 1956, Thomas Watson's son Thomas Watson Jr. succeeded his father as head of IBM, ushering in the era of computing for life. Under his leadership, the company's revenues grew to $8 billion, and the number of employees to 270 thousand people.
In 1964, the IBM System/360 family was introduced, which were: the first universal computers, the first designed family of computers, the first computers with byte-addressable memory, etc. System/360-compatible IBM System z computers are still being produced: this is an absolute record compatibility.
In 1971, the company introduced the floppy disk, which became the standard for data storage.
In 1972, an updated logo (blue striped letters) of the company was introduced, which is still used today. Designer Paul Rand worked on the logo (English)Russian.
1981 has firmly entered the history of mankind as the year of the appearance of the Personal Computer “IBM PC”. 640 kilobytes of RAM and one or two floppy drives were enough to run the DOS operating system, offered by the then small company Microsoft, and a number of applications. Along with DOS, models were offered on the CP/M-86 and UCSD Pascal P-system operating systems, but these systems did not survive, since Microsoft provided a unique offer for that time: purchase for lump sum payment a license to supply software to an unlimited number of computers, which significantly reduced the price of a configuration with MS-DOS, which attracted a large number of buyers and, accordingly, brought wide popularity to Microsoft.
It is noteworthy that at first the company’s management did not attach any importance to this machine: the development was carried out by a group of only 4 people (under the leadership of Philip Donald Estridge). The most noticeable consequences were that, contrary to its strict principles of intellectual property protection, IBM did not patent either DOS (with a BASIC language interpreter) or another revolutionary invention of the developers - BIOS. As a result, more astute third-party developers made clones of the IBM PC using published specifications, which led to explosive market growth, but a large share (and a significant amount) was lost to IBM.
Around 1984, the AS/400 series was launched, a mini-computer designed for business tasks. It was backward compatible with previously released S/36 and S/38 minicomputers. It used Micro-Channel bus technologies (MCA) and the SCSI interface, which is still used in servers. Computers in this series are still in production and can use any software developed earlier.
In 1986, IBM lost 1st place in sales in the personal computer market it itself created.
In 1990, an attempt was made to seize the initiative in the personal computer market with the release of PS/2 series computers with the OS/2 operating system, which were not compatible either in hardware or software with PC and DOS. The machines used progressive technologies, for example, the Micro-Channel bus (much superior to the ISA bus then used in PCs, and the PCI bus appeared only in 1991). The PS/2 series did not receive widespread market recognition, and its production was soon discontinued. However, connectors for keyboards and mice based on a Mini-DIN plug, called PS/2 ports, are still widely used in PCs.
As part of this series, the OS/2 Warp V3.0 operating system was planned to be released, initially created directly with Microsoft, but IBM continued to rely on the mainframe market, which led to a delay in the development of this project. As a result, Microsoft switched to Windows development, and a series of computers running OS/2 entered the market later than planned and, despite massive advertising campaign and very good characteristics, the project could not survive on the market.
Era of Consulting
IBM office in Kazan
Focusing its business on the delivery of services, in 2005 IBM sold its division for the production and sale of personal computers (the ThinkPad and ThinkCentre lines) to the Chinese company Lenovo for $1.8 billion. And in 2014, Lenovo also bought from IBM for $2.3 billion a division responsible for the development and production of x86 servers (mainly the System X and BladeCenter lines). Also in 2014, by selling its semiconductor factories to GlobalFoundries, IBM announced that it was becoming a fabless company in the semiconductor segment, continuing to develop processors but abandoning their production.
Beginning around 2007, IBM began to operate in the segment of cloud computing and business services delivered over the Internet. Strengthening its position in this sector, in 2013 IBM bought a large international hosting provider, Softlayer Technologies, for approximately $2 billion. (English)Russian, which owned a network of 13 data centers in the USA, Singapore and Amsterdam, and in 2014 announced an investment of over $1.2 billion in the construction of 15 new data centers as part of a strategy to expand cloud services on the IBM Cloud platform (English)Russian .
In March 2017, IBM announced the IBM Q project to create the world's first universal quantum computer, access to the resources of which will be provided through the IBM Cloud cloud platform (English)Russian. It is planned that within several years a universal quantum computing system will be created to carry out tasks for the development of new medicines, advanced materials, research in the field of artificial intelligence, digital security, logistics and financial services. And in November 2017, IBM scientists successfully built and measured a prototype processor with 50-quantum bits.
At the IBM Think 2018 conference, company representatives presented the smallest computer in the world today. This computer has a size of 1 by 1 millimeter, which is comparable to the size of a grain of table salt. The cost of producing one such computer is estimated at less than 10 cents.
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Activity
Key divisions of IBM:
- IBM Global Services (English)Russian (IGS, consulting division), brought the company $47.357 billion in revenue out of $91.134 billion in total in 2015;
- IBM Software Group(software development division), brought the company $15.753 billion in revenue in 2015;
- IBM Systems & Technology Group(STG, equipment manufacturing division), brought the company $23.857 billion in 2015;
- IBM Watson Group(a division of cognitive computing - which grew out of the development of the IBM Watson supercomputer project);
- IBM Research (English)Russian ;
- IBM Global Financing.
Software
IBM's influence on the development of computing and software
Significant developments in the information technology industry
- 1943 - Mark I, the first American computer;
- 1946 (September 27) - the first commercial calculator;
- 1956 - the first commercial hard drive;
- 1957 - Fortran compiler released;
- 1959 - the first airline ticket reservation system - Saber (English)
Photo: © Frickr © alui0000 / Alfred Lui
IBM is the company that has made an unimaginably large contribution to the development of the computer industry, which everyone knows without exception. But the whole point is that hardly anyone will say what exactly IBM became famous for, what the IBM PC is and who was this company's main competitor. We will try to shed a little light on the remarkable success story of this corporation. And let's start right from the end.
Once upon a time, IBM produced laptops, its main competitor was the now famous company Apple. IBM has a great many different scientific discoveries and developments, as well as achievements in introducing them into daily life. Five physicists who received Nobel Prizes, worked within the walls of IBM, and almost all currently known technologies came from this corporation.
The history of IBM goes back more than a century. The official year of foundation is considered to be 1896. There were still ten years left before the first computers appeared... The founder of the company is engineer Herman Hollerith. The main activity of IBM, and then it was called TMC, is initial stage was the production of calculating and analytical machines.
Herman Hollerith founded his own company, inspired by the success of his development, namely the invention of a switch that allows encoding information. The invention was a great success, which promised a bright future for the new company. Hollerith's unique machines were chosen by the US government to conduct the census in 1890. And the government, I must say, made the right decision. After the census, data processing took only a year, thanks to Hollerith's machines, whereas previously the process took eight years. At first, TMC tried to produce commercial equipment, but then, when the 1900 census was being prepared, it switched back to the Census Bureau profile. Then she returned to commercial development again.
When Herman Hollerith founded the company, he was already 39 years old. He was getting old and his health was deteriorating. And by 1911, TMC was sold to Charles Flint. It was valued at $2.3 million. Hollerith received just over half of the money from this deal. This was not just a purchase, but a merger of TMS with other companies - ITRC and CSC. Of these three companies, one was formed, which became known as CTR. It was similar to the IBM we know. And so it turned out that IBM has both a grandfather (Herman Hollerith) and a father (Charles Flint).
If Hollerith was an engineer and scientist, then Flint, who took control, was a talented financier. He knew how to subtly and accurately determine which financial union would be promising, which company would be better to merge with which, and in what direction to direct investments. His brainchildren are still functioning, developing and making a profit, having outlived their founder by many years.
The CTR Corporation, created in 1911, was engaged in the production of unique technological equipment. For example, time tracking systems, punched card equipment, scales. Three years later, Flint was replaced as director by Thomas Watson, who a year later, in 1915, received the position of president of the corporation. In 1917, the company acquired its modern name - IBM (Business Machines Co., Limited). Under this brand it entered the Canadian market, but entered the American market a little later, in 1924.
The company operated steadily for a quarter of a century, surviving the Great Depression with virtually no downsizing measures. In 1928, IBM released fundamentally the new kind punched cards containing 80 columns. This new product was called the IBM Card and was in great demand for adding machines and computers for the next few decades.
There is also a black spot on IBM’s reputation... The writer Edwin Black published the book “IBM and the Holocaust,” which tells that the corporation’s machines were used in Nazi Germany to keep statistics on Jewish prisoners. The book even mentions the codes used. In response to the publication of this book, IBM stated that it was not concerned with the continued use of the equipment, it was simply selling the machines. In addition, IBM is not the only American company that has done such a business. Well, and of course, after Germany’s defeat in the war, it was with the help of IBM equipment that it was possible to track many people and their destinies. Of course, victims or relatives of victims of the Holocaust and war demanded an official apology, but IBM abdicated all responsibility and did not satisfy the demands.
IBM continues to operate today, conduct scientific research, and produce new products. The story of this giant does not end, but continues, and who knows what heights IBM will reach...
Companies
Unique Samsung Galaxy Note 3
The market for powerful communicators today is replete with assortment. But Samsung never ceases to amaze us with its inventions. Very soon you will be able to buy a new Galaxy Note 3 phone in Dnepropetrovsk thanks to the Mobistok online store. ...Comprehensive office cleaning from the Crystal World company
Agree, cleaning is one of the most unpleasant activities. For example, you can still clean an apartment yourself, but if there are several apartments, and in addition there is a country house and a dacha that should be clean before your arrival, you can’t clean it yourself...Exceeds 700 billion dollars, and its Apple devices are popular all over the world - from North America before South-East Asia. And it is generally accepted that the first personal computer was developed by Apple in 1976. In fact, the first computer in the United States was developed by a completely different IT giant - International Business Machine (IBM). By the way, shares of this company are traded on St. Petersburg stock exchange under the ticker symbol IBM, so that any resident of Russia can invest in these securities or trade without the need to open an account with a US broker. Its history dates back to 1911 - then it was called Computing Tabulating Recording (CTR) and was engaged in the production of punching machines, cheese slicers, etc. The founder was engineer Herman Hollerith, who invented the world's first computing and analytical devices. This giant acquired its modern name in 1924, when it was significantly expanded and new markets were being developed. And in 1943, IBM produced the first computer in the United States.
Today, IBM is the world's largest company directly in the IT sector. Thanks to its deeply diversified business, the management of this giant has managed to maintain a consistently leading position in the global high-tech sector for more than 70 years. At the same time, over the past 3 years, the company’s business has frankly not been going very well, which has a negative impact on its shares - since 2012, the shares have fallen in price by 22%. However, despite this, long-term and more conservative investors are inclined to hold shares of companies such as IBM in their portfolio. One of these investors is Warren Buffett, who in 2011 purchased shares of the IT giant for $10.7 billion. Therefore, the current stock dynamics can be viewed more as a medium-term correction rather than a sustainable long-term trend.
However, as far as the IT sector is concerned, the overall situation is still developing rather ambiguously. On the one hand, the Nasdaq index is at its highest since 2001, when the Internet industry in the United States took off rapidly, and industry giants, one after another, are reporting increases in profits and key financial indicators. However, on the other hand, there are more and more investors who are disillusioned with this market and do not see serious prospects for making a profit from their investments. Indeed, in the last two years there has been very little interesting ideas– the last one is the most interesting investment idea there were Facebook papers after the IPO in 2012. Since then, there have been no interesting ideas among American securities - the last most notable placement was with the Chinese Internet giant Alibaba Group. But it is precisely at such moments, as history shows, that IBM shares take off, since they are something of a defensive stock in the IT sector.
What does IBM do?
The main activity of IBM is the development of software and hardware, as well as the provision of consulting services in the field of information technology. As such, the company does not have a specialized segment of the IT market, the business is deeply diversified, and the largest area of activity (creating infrastructure solutions in the IT field) accounts for no more than 35% of total revenue. The company focuses its activities on the innovative component of business, which is an absolute advantage that ensures a competitive position in the global IT industry. However, in recent years, management has not been able to successfully compete with other industry giants, such as the German SAP or Microsoft. Now IBM is actively considering new areas of activity, but so far it all comes down to not the most successful acquisitions of other IT companies.
Main development trends of IBM
IBM's largest activities are the development of software and infrastructure solutions in the IT field. These two account for almost 70% of total revenue - that's more than $60 billion. In recent years, the company has been actively developing new business areas - technical support for various IT systems and services, as well as comprehensive solutions for business clients (mainly related to the automation of business processes through IT services). Their share in the total revenue structure is 28%. However, in recent years, due to weak demand in Europe and Japan, these business segments have been reducing profitability.
Geographically, the largest share in the revenue structure is occupied by US IT - almost 35%. The Japanese market also has a fairly high share - more than 9%. Thus, the company’s business is diversified in two directions at once - geographical and segmental. However, due to the crisis in Europe and Japan, as well as competition from other giants in the IT industry (Google, Microsoft, SAP, etc.), the company is actively looking for new markets and is constantly restructuring its business. In particular, in January it appeared in the media that management was preparing to cut about 111 thousand personnel (about 26% of the total staff). This is the largest reduction in the history of the company, but the press service later denied this data, saying that the reductions would affect only several thousand employees and amount to no more than 3 thousand people.
Financial indicators
IBM's financial results remain quite weak. For the 2014 financial year, total revenue was $92.8 billion, which is 6% less than last year. Net also decreased to $15.8 billion compared to $16.9 billion a year earlier. At the same time, in the first quarter of the 2015 financial year, revenue accelerated the decline and amounted to just over 24.1 billion dollars, which is 15% less than the same period a year earlier, and amounted to less than 5.5 billion dollars, which is 12% less than the 1st quarter of the 2014 financial year. Such weak results frankly disappointed investors - after the release of the earnings, the company's shares sank by 3.5% and fell below the important support level of $155 per share. It was possible to recover this fall only a week later in early February, when the high-tech Nasdaq index tried to overcome the psychological mark of 5,000 points.
However, the company's fundamentals are quite strong, which is a direct consequence of management's conservative strategy. At first glance, the debt burden is quite high - the Debt/Equity ratio, which determines the ratio of debt to equity, is 3.4. However, even such seemingly large debts are not fatal for such a reliable issuer, especially since most of these obligations are long-term - about 2.96. Profitability indicators are significantly better than those of peer companies. Thus, equity ROE is 95.9%, average ROI reaches 29.9%, and return on assets ROA is 11.9%. For example, the German business software developer SAP has similar figures of 19.9%, 16.5% and 11.3%, respectively.
True, operating profitability indicators are somewhat lower than in the sector as a whole. Thus, the gross profitability of the company and the sector is 50% and 63.9%, respectively, and operating profitability is 21.5% versus 24%. In terms of the company's and sector's margins, the gap is even greater - the pre-tax profit margin is 21.54% and 32.35%, respectively, and 17% and 22.9%.
However, low comparative figures are associated with high business diversification and conservative management policies, which limits the profitability of the business as a whole, but in return this significantly reduces financial risks and increases the stability of the company.
With all this, IBM shares fell by 13.14% over the year, and since the beginning of this year the drawdown has been slightly less than 1% - to $157.80. For comparison, in general, in the Information Technology Services sector from the S&P500 index, in which the company’s securities are traded, capitalization over the year decreased by only 4.3%, and since the beginning of the year it has been growing by 0.25%. However, is this dynamic justified?
Is there potential for growth?
The company's P/E ratio is 10.05, which is a very low figure for high-tech companies, especially in IBM's core sector. For comparison, for the sector as a whole this is 15.61. At the same time, the P/Sales ratio for the company and the sector is 1.68 and 1.64, respectively, and the ratio indicator market capitalization to book value of assets P/Book is 13.17 and 6.24. According to the listed multiples, IBM shares are one of the most attractive among large companies in the high-tech sector.
The return on shares is also quite high. Thus, comparative earnings per share for the company and the sector are $91.85 and $56.13, respectively, and base earnings are $15.68 and $11.56. Besides, cash flow per share is $20.04 and $15.33, respectively. Such indicators indicate a higher profitability of IBM's investment activities compared to its core sector.
As a result, we can conclude that the drawdown in the IT giant’s securities that is currently observed is a temporary phenomenon. On average and long term IBM's capitalization will grow, otherwise people like Warren Buffett would not hold their shares in their portfolio. The potential for growth in quotes is quite large, and the end of the drawdown in the price of IBM securities will make them the most attractive for medium- and long-term investments.
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The most important achievement of the 20th century is the creation of the personal computer IBM PC, which had a huge impact on the development of the computer industry. This event not only became the starting point in the creation of personal computers, but also significantly affected the fate of Microsoft. The deal concluded between IBM and Microsoft turned the latter from an ordinary company into a giant of the computer industry, and Bill Gates into the richest man on the planet.
In this article we will talk about the interesting details of this transaction, which have not yet been widely publicized.
Quite a lot of articles are devoted to IBM and Microsoft, both in print publications and on various Internet resources. It would seem that what new can be said about them? After all, there are no blank spots in the history of these companies... or almost none? However, let’s not get ahead of ourselves and, in order to be completely consistent, we will briefly outline the history of these companies. Paying tribute to historical justice, we, of course, will begin the story with IBM, which is one of the oldest (if not the oldest) companies in the computer market.
IBM Company
The history of IBM (International Business Machines) dates back to the beginning of the last century. Currently, the American company IBM is one of the world's largest corporations engaged in the production of servers and software, as well as research and development in various fields of science. The company's headquarters are located in Armonk, New York.
Of course for full description A short article is not enough about the history of IBM, so we will not go into chronological details, but will only try to give a general idea of it.
The company was officially founded in 1911, but received its modern name only in 1924. However, if we talk not about the date of registration of the company, but about its history, then it is worth starting with the invention of Herman Hollerith electric machine for processing data using perforated cards. Herman Hollerith was an employee of the US Census Bureau and proposed to automate the statistical recording of immigrants using punched cards processed on electromechanical counting and punching machines. Subsequently, Hollerith's paper punched cards served as the basis for data storage systems and were actively used until the 50s of the 20th century.
The electromechanical tabulating and punching machine invented by Hollerith was so successful that in 1896 he was able to create a company called the Tabulating Machine Co.
Fifteen years later, in 1911, financier Charles Flint merged the Tabulating Machine Co., which by that time was on the verge of bankruptcy, with two of his companies. As a result, on June 15, 1911, a company called Computing Tabulating Recording (CTR) was registered in New York, which was later renamed IBM.
In 1914, Thomas J. Watson, Sr. became CTR's general manager and led the company successfully for nearly 40 years.
The CTR company specialized in the production of tabulators and other counting and punching machines, and by 1919 its turnover reached $2 million.
The production of counting and punching machines remained the company's main activity until 1952, when Thomas Watson Jr. took over as president of the company. It was then that IBM began to work closely on the development and production of computers.
Omitting some facts from the history of IBM, let's go straight to 1980, when events occurred that significantly influenced its future fate.
By 1980, IBM was the largest computer company: it owned virtually half of all profits in the world computer market, and the number of employees was 425 thousand. However, American companies competing with IBM had already begun to produce and sell small home computers, which were called microcomputers. It is reliably known that by 1980 at least 200 thousand such devices were sold in the USA. And this new direction developed without the participation of the market leader - IBM. One should not assume that its leadership sat idly by and indifferently watched the situation develop. As Paul Carrol, author of Big Blues: The Unmaking of IBM, recalls, IBM made two or three serious attempts to build a microcomputer, but all were unsuccessful.
And so a group of engineers from IBM's Special Projects Department in Boca Reton, Florida, told IBM management that they had found a solution. Until then, IBM had always produced all its own components for its computers. The engineers decided to change this strategy and proposed producing computers using individual components from other manufacturers. Administrator Bill Lowe promoted this idea.
“For the first time, we recommended that IBM management change their policy and start using it in their products. software and third-party components,” recalls Bill Lowe. IBM management hesitated for a long time before making a final decision. And in order to test how viable this idea was, an initiative group led by Bill Lowe was tasked with preparing to develop a microcomputer. Special Projects Department Administrator Jack Sams collected all the components needed to create it. This is how he recalls the events of that time: “I remember the first meeting was scheduled for Sunday. There were 13 of us, and we were told that we were given 30 days to prepare a program to create and test a new system.”
However, here we will interrupt the story in order to talk about Microsoft, since the further history of IBM is connected with it.
Microsoft Company
The history of Microsoft Corporation, of course, is shorter than that of IBM - it begins on April 4, 1975. It was then that childhood friends Paul Allen and Bill Gates registered a software development company in Albuquerque (New Mexico), which they named Microsoft.
Bill Gates, then a 20-year-old young man, dropped out of college to get serious about programming and working in his own company. While still in college, he made a living by programming. In addition, Gates turned out to be a talented and quite adventurous entrepreneur. This is how Stefan Maines, author of a biography of Gates, speaks of him “flatteringly”: “He hired teenagers to work for him and sold their work, paying them a pittance and charging exorbitant prices from clients.”
Even before the formation of Microsoft, Gates and Alain created the Basic programming language, the rights to use which were sold to MITS, the first to develop the personal computer - Altair.
In 1977, Microsoft released its first product - the Fortran programming language for running on the CP/M operating system. In April 1978, the company created the Cobol-80 programming language to work with the 8080, 8085 and Z-80 microprocessors, and already in October of the same year, the rights to use and license for Basic were purchased from Microsoft Apple and Radio Shack.
The company became widely known on April 4, 1978, having received a million-dollar prize for developing the Basic language, which became the first high-level programming language for 16-bit processors.
By 1980, Microsoft had 30 employees, including sales director Mark Ursino.
“I have always admired Bill Gates's ability to talk about literally everything. He was an excellent conversationalist, and you always felt that he was listening to you carefully. He analyzed your words and evaluated you to see if you could bring value to his company,” recalls Mark Ursino.
Another Microsoft employee was 35-year-old Bob O'Reir, who previously worked as a computer engineer at NASA. Although he was 10 years older than his colleagues and had academic degrees in mathematics and astrophysics, he quickly got used to the democratic environment at Microsoft.
“We went to work in whatever we wanted. The clothes were loose - Bermuda pants or a tracksuit. The atmosphere in the company was relaxed, like a bachelor's fraternity,” recalls Bob O’Reir.
Microsoft's office was located in Bellevue, a suburb of Seattle, and occupied a small room in a bank building, and the atmosphere that reigned in the company was completely contrary to the image of business America: the accountant worked barefoot, receipts were kept in a shoebox.
Deal between IBM and Microsoft
Bill Lowe, who headed initiative group IBM assigned Jack Sams to contact Microsoft to create a personal computer. History is silent about why this particular company was chosen, but the fact remains: it was Microsoft that came to the attention of IBM. Jack Sams's task was to find two programs: a programming language and operating system for the future PC.
On July 21, 1980, the morning after receiving the assignment, Jack Sams called Bill Gates and arranged a meeting. This phone call was key point in US business. IBM by that time had an annual income of $26 billion. Net profit was $3.6 billion. Microsoft at that moment had practically nothing.
On July 22, Jack Sams arrived with other IBM representatives at the 10800 block of 8th and 108th Streets in Bellevue. They went up to the eighth floor and went into office number 819, where Microsoft was located, and asked Bill Gates.
“A young man who looked like a courier came out of the back room and said, 'Come in here.' “When I entered the office, I asked if I could see Bill Gates,” recalls Jack Sams, “and only then did I realize that it was not the courier, but Bill Gates himself.”
Sams's task was to form an opinion about Gates and Microsoft, but at the same time, if possible, not talk about IBM's plans.
“During the conversation, Gates was very tense and focused. He didn’t even care about his tie being askew,” this is how Jack Sams comments on their first meeting.
Sams refrained from discussing the details of the project, but realized that Microsoft could provide both the programming language and the operating system.
“Now all we had to do was go back and convince the company's management to make a deal with Microsoft,” recalls Jack Sams.
On August 6, 1980, on the recommendation of Sams, Bill Lowe presented to IBM management the idea of creating a microcomputer based on third-party components and software from Microsoft. Not everyone in the company's management supported this idea, but... Frank Carey, Chairman of the Board of Directors, liked it. He gave Bill Lowe free reign. Lowe and Sams were given a year to build the microcomputer, test it, and bring it to market.
The successful execution of the work by Lowe's department promised IBM the conquest of key positions in the new sales market and the receipt of billions in profits. However, no one at IBM suspected that Gates' team was unable to fulfill the order - the new operating system that was expected from Microsoft simply did not exist.
A month after the first visit to the young computer company Jack Sams visited Bellevue again. On August 21, 1980, he arrived for a meeting with Gates and his staff.
Sams explained in detail what IBM was going to produce and what the hardware of a personal computer would look like. He wanted to purchase two products from Microsoft: a programming language and an operating system. Gates said that IBM could get the Basic programming language from Microsoft and there would be no problem with that. However, serious difficulties arose with the operating system. “There is only one company,” Gates explained, “that can do this. And this company is not Microsoft." Gates was confident that only Digital Research could develop the operating system IBM needed.
Digital Research had a pretty good operating system designed to work with 8-bit processors, and all that was required was to convert it to a 16-bit processor.
Gates immediately called Gary Kildell, head of Digital Research, and set up a meeting with Jack Sams the next day.
“When the IBM people left, Bill was beside himself. We knew that a deal like this with IBM, if it went through, would completely change the face of our company,” recalls Microsoft sales director Mark Ursino.
On August 22, 1980, Jack Sams arrived in California to meet with Gary Kildell. However, negotiations with the owner of Digital Research were unsuccessful. Gary Kildell refused to sign a unilateral secrecy agreement regarding the IBM project. IBM representatives insisted that they could disclose information obtained from Digital Research, but not vice versa. As a result, the deal between IBM and Digital Research did not take place. Sams, in desperation, called Bill Gates and said that they could not reach an agreement with Digital Research, and also said that they would have to terminate the deal if Gates did not get the operating system, since a computer without an operating system was worth nothing.
Two weeks later, Gates's companion Paul Allan found a way out. A half-hour drive from Microsoft's office in the suburb of Tukwila, the owner of a computer hardware store called Seattle Computer had a rather crude, homegrown operating system. The store was owned by amateur programmer Rod Brock.
“The company was supported by two technicians - me and Tim Patterson. Tim and I tried to act like business people, but we were just techies,” recalls Rod Brock.
25-year-old programmer Tim Patterson created the operating system in just four months and called it the Quick and Dirty Operating System (QDOS).
The QDOS system was only suitable as a rough draft for a future IBM operating system. It required significant changes, but the finished kernel saved many months of work. Tim Patterson was invited from the same Seattle Computer to fine-tune the operating system.
On September 22, 1980, Paul Allan called Rod Brock and offered to sell him a license for QDOS, to which he agreed, setting a price of $10,000. Gates contacted IBM and offered a choice of two options: either he buys a license for QDOS himself, or IBM does it. IBM preferred that Microsoft do this.
The next step was the preparation of a formal proposal from IBM - the largest business proposal received in Microsoft's history. Everything had to be prepared a week before the meeting in Florida.
On the evening of September 29, 1980, on the eve of the official proposal, Bill Gates, company director Steve Ballmer and chief programmer Bob O'Reir were working on documents.
“We finished writing the proposal, took it out of the printer, put it in a folder and hurried to the airport,” Bob O’Reir recalls.
Bill Gates, Steve Ballmer and Bob O'Reir were the last passengers to board the overnight flight to Miami. On September 30, 1980 at 7 a.m. they flew to Miami. The meeting was scheduled for 10 o'clock. It was three hours away.
As it turned out upon arrival, Gates didn’t even have a tie, which was absolutely necessary for the business meeting (and later it turned out that he didn’t even know how to tie it). Before the visit to IBM, it was decided to go to the shopping center and dress Gates appropriately. But, as luck would have it, the shopping center opened at exactly 10 o’clock, so Gates and his companions arrived 20 minutes late for the meeting with IBM representatives.
The meeting with IBM representatives took place in Boka Raton. IBM presented new requirements for the work schedule, so the discussion of Microsoft's proposal had to be postponed to the next day.
Finally, on October 1, Gates was ready to close the deal. Jack Sams, who had a good attitude towards Gates, took him aside and whispered: “Don’t be shy, ask for more. We know it's expensive, and it should be expensive. If you want a million dollars, we will give you a million."
But... Bill didn't need a million dollars. Gates surprised IBM with his offer: he asked only 400 thousand for a license for the Basic computer language and was ready to attach QDOS to it for free, but subject to the following conditions: he was paid one dollar for each computer sold by IBM, and was given the opportunity to sell his software to other computer manufacturers. IBM agreed to these terms, thereby making the largest strategic mistake throughout its history. IBM was skeptical about the personal computer market, naively believing that it would never become widespread, and therefore considered Mcirosoft’s conditions to be quite acceptable.
After two days of negotiations, Gates left Boca Reton, having entered into a verbal agreement with IBM. This deal was very cheap for IBM, and Gates, having agreed to the opportunity to sell software to other companies, actually received a machine for printing money.
However, Gates missed something: he did not have time to conclude an agreement with Seattle Computer to use the QDOS operating system, and therefore sold IBM a product that did not belong to him. But Rod Brock from Seattle Computer could have refused the verbal agreement with Microsoft.
On November 10, Paul Allan was assigned to close the deal with Rod Brock of Seattle Computer. According to the oral agreement, Brock was entitled to a certain amount each time Gates entered into a new agreement to produce computers based on QDOS. Microsoft agreed to pay Seattle Computer $10,000 for each new contract. At the same time, Brock naively believed that Microsoft would be able to sell the system to at least a dozen companies. But Microsoft had only one client - IBM, which Rod Brock didn't even know about.
Before the deal was finalized, Gates unexpectedly decided to make changes to the contract with Seattle Computer. According to the preliminary agreement, Gates had a non-exclusive agreement to license the QDOS operating system. Now he wanted to be the only seller of QDOS, citing the fact that exclusive rights to use QDOS would allow Microsoft to increase sales. In two weeks, Gates and his lawyers prepared new option agreement on the transfer of a license for the QDOS operating system.
On July 10, 1981, a version of the contract was sent to Seattle Computer, which included the following paragraph: “Microsoft becomes the sole owner of QDOS.”
Microsoft CEO Steve Ballmer met with Rod Brock to finalize the deal, and he began to persuade Brock that the sale of QDOS would be beneficial to Seattle Computer, since it would be able to sell computers with an improved QDOS operating system and receive all future improvements for free. Even more tempting was the financial part of the offer. Having signed the agreement, Brock received $50 thousand from Microsoft. Needing money, on July 27, 1981, Brock agreed to Microsoft's terms and signed the agreement. Now the rights to the QDOS system belonged entirely to Microsoft.
While Bill Gates and Steve Ballmer were settling things with Seattle Computer, programmers under Bob O'Reir continued to make changes to the QDOS operating system to make it compatible with the IBM computer. The new, improved operating system was called MS-DOS (Microsoft Disk Operating System).
On August 12, 1981, two weeks after signing the contract to purchase QDOS, IBM released its first personal computer. When designing it, the principle of open architecture was applied: the components were universal, which made it possible to upgrade the computer in parts. The IBM PC used developments from other companies, for example the i8088 microprocessor from Intel Corporation.
The official presentation of the IBM PC took place on September 12, 1981 in New York, its announced base price was $1,565. No one knew what would come of it.
Sales began in October 1981, and by the end of the year more than 35 thousand cars were sold. However, the market demanded more and more. Five years later, PC production reached 3 million units. Competitors copied IBM's computer designs and began producing their own PC models. Because Bill Gates could sell his software without restrictions, IBM's competitors bought both the MS-DOS operating system and the Basic programming language, making Gates a millionaire almost overnight.
Nobody expected such a demand for personal computers, so IBM did not think in time to secure full rights to the MS-DOS operating system. As a result, today the market value of IBM, which could own the entire computer market, is half that of Microsoft, which, with the rights to the operating system, has grown from a small company into a global corporation worth more than $200 billion.