The Colossus That Works

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from its traditional practices, IBM built the PC largely from parts bought from outside suppliers and is selling it through retail outlets like Sears and ComputerLand, as well as its own sales network. The company has begun offering discount prices and introducing new products at an accelerated rate. Last December IBM spent $250 million to acquire 12% of Intel, a leading computer-chip maker based in Santa Clara, Calif. In June IBM paid $228 million for a 15% stake in Rolm, also of Santa Clara, a major producer of telecommunications equipment. IBM plans to use Rolm to help create the so-called electronic office. Says Ulric Weil, a top computer analyst for Morgan Stanley & Co.: "We're watching a total transformation of the corporation."

In June IBM Chairman Opel announced that 1983 results were outstripping last year's. That helped push up the price of IBM stock, a leader in the eleven-month-old Wall Street bull rally. After years of hardly moving, IBM shares have nearly doubled in price since the rally started, climbing from 62% last August to close last week at 121.

Traditionally, IBM has been so deep in talent that its alumni have gone on to staff laboratories and executive suites throughout the computer industry. "Almost everybody in the business seems to be a former IBMer," observes William Easterbrook, an ex-IBM manager in Copenhagen who now watches the computer industry for Kidder, Peabody, a Wall Street securities firm. Illustrious former employees include Gene Amdahl, founder of Amdahl Corp. (1982 sales: $462 million), which makes large computers; Joe M. Henson, president of Prime Computer (1982 sales: $436 million), a major producer of minicomputers; and David Martin, president of National Advanced Systems, the computer unit of National Semiconductor. Former employees usually speak highly of Big Blue. Says Fla-vil Van Dyke, president of Genigraphics, a computer-graphics firm: "I still look back fondly at IBM and try to run my company by IBM standards."

Customers of IBM often speak with that same kind of devotion. Some have been known to refuse to see salesmen from rival firms. Says James Marston, vice president for data processing with American Airlines: "You can take any specific piece of hardware or software and perhaps do better than IBM, but across the board IBM offers an unbeatable system." IBM buyers range from Government agencies like the National Aeronautics and Space Administration, which directs space-shuttle missions with Big Blue equipment, to firms as diverse as Bank of America and Coca-Cola.

Longtime industry observers view the loyalty of some customers as a natural outgrowth of the attitudes that IBM drills into its workers from the day they arrive. "IBM creates an environment that is unique because of its strong set of beliefs and principles," says Martin. "It is almost overwhelming how it affects employees and rubs off on customers."

IBM's strong corporate culture is the lengthened shadow of Thomas Watson Sr., a charismatic executive who joined the Computing-Tabulating-Recording Corp. in 1914, renamed it International Business Machines in 1924, and ran it until a month before his death in 1956. Watson was a visionary who believed above all in his company.

Under Watson, IBM had rules for practically everything. Employees were told what to wear