Two Heavyweights Kiss and Make Up : Computer world shakes: IBM, Apple cut a deal

When longtime rivals International Business Machines Corp. and Apple Computer announced the other day that they’re teaming up to push computer technology to new horizons, competitors the world over took notice. For it was a shot across the bow of the entire industry--a shot no doubt heard around the world.

The unusual alliance is a bold and strategic bid by these two computer giants to keep themselves at the top of the heap. The move could also help U.S. industry stay at the cutting edge of technology. That is crucial to keeping ahead of global competition. A deep competitive spirit and innovative thinking are needed. The U.S. franchise in computers is still No. 1 worldwide, but fierce competition in a crowded and recessionary market has taken its toll.

Staid Big Blue (IBM) and trendy Apple, founded by a college dropout, signed a letter of intent for a broad technology swap that covers software, hardware, research and sales. They will form a new company to develop, among other things, computer software to simplify programming nationwide and to integrate Apple’s user-friendly Macintosh computer design into IBM systems, in addition to applying powerful new computer chips from Motorola.

The world of personal computing in the 1990s is likely to change dramatically. The marketing clout of IBM together with the creativity of Apple, which revolutionized personal computers with its easy-to-use Macintosh machines, could produce a whole new generation of personal computers. That could make easy-to-use machines available to a wide range of consumers and business.

The Justice Department is reported to be reviewing the move. No doubt some competitors will argue against it on anti-trust grounds. But such a shakeout in the industry may have been inevitable. Consumers need an industry that makes products that are simpler to use and compatible with other lines.

And the industry itself has been hurting: Even IBM and Apple, which together account for 40% of the industry, have problems. Both firms have suffered a decline in earnings and have trimmed their work forces.

Their new cooperative venture reflects rising competitive pressures of a maturing, 10-year-old personal computer industry in which no one company has the resources to develop major products alone. IBM and Apple built their personal computer empires on systems largely incompatible with each other--and by serving different markets. With the slowdown in the office and home computer markets, they felt the need to pioneer new products.

Changing the course of an entire industry usually takes a long time, but IBM and Apple are setting out on a new path. The two companies are classic casebook studies of American enterprise and innovation. Their alliance now opens a new chapter for the companies and the computer industry. We hope the new venture reinvigorates both companies, rather than derails them. At stake is the future competitiveness of the U.S. computer industry--still on top but feeling some heat.