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The IBM management formula worked so well that the company in the 1960s came to be known as Snow White while its competitors were derisively dubbed the Seven Dwarfs. The dwarfs (Burroughs, Univac, NCR, Control Data, Honeywell, General Electric and RCA) dwindled to five when GE and RCA quit the computer business in the 1970s, and the others are now collectively referred to by their first initials as the BUNCH.
IBM's very success, however, almost backfired against the company. The Johnson Administration on its final working day in office, Jan. 17, 1969, opened a massive antitrust case, accusing the company of monopolistic and anticompetitive practices. The federal suit dragged on endlessly—at a cost to IBM of several hundred million dollars in legal fees—until the Justice Department abruptly dropped it in January 1982, declaring that the case was "without merit." Recalls former IBM Chairman Frank Cary, Opel's predecessor: "The suit was a tremendous cloud that was over the company for 13 years. It couldn't help influencing us in a whole variety of ways. Ending it lifted a huge burden from management's shoulders." Jeffrey Zuckerman, special assistant to Antitrust Division Chief William Baxter, concurs: "We believe IBM must have been deterred from competing as aggressively as it otherwise would have."
Whatever the reason, IBM's momentum slowed markedly in the 1970s, a period Cary called "a time of planning and consolidation." The company entered the decade with a 60% share of the computer market and emerged with a still impressive but slimmed-down 40%.
Though IBM was growing at a respectable annual rate of 13%, the computer industry was expanding even faster. One challenge came from the Route 128 area around Boston, where Digital Equipment and other firms launched the minicomputer. Such machines were smaller and cheaper than the large ones IBM offered, but still performed a wide range of data-processing functions. Revenues of Digital Equipment, the leading maker of minis, have climbed from $265 million to about $4 billion over the past ten years.
Another challenge came from California's Silicon Valley, where the microprocessor, or computer-on-a-chip, was developed. The tiny devices packed thousands of circuits onto a postage-stamp-size silicon chip and gave rise to the microcomputer. Apple recognized the potentially vast appeal of personal computing, and its sales jumped from less than $1 million to $582 million between 1977 and 1982.
By the start of the 1980s, however, IBM had begun to move in new directions, and the dismissal of the lawsuit helped to accelerate the process. The most notable example was in the personal-computer field. Although IBM had been monitoring the market for years, it refused to jump in until it began seeing personal computers appear in offices and became convinced that there was enough demand to make their entry pay off. "There's no particular challenge to building a personal computer other than to build one that someone wants," says Gary.
The task of overseeing the creation of the PC fell to