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Computer Superpowers Bury Hatchet in Historic Technology-Sharing Treaty Graphic With

July 3, 1991

Computer Superpowers Bury Hatchet in Historic Technology-Sharing Treaty Graphic With AM-Apple-IBM-Box

NEW YORK (AP) _ Former enemies Apple Computer and IBM joined forces Wednesday in a broad pact to swap prized technologies, develop new machines and seize control of the industry’s splintered direction.

The agreement marked the most dramatic example yet of cooperation among rival powers in computing. Industry analysts described it as the business equivalent of a U.S.-Soviet friendship treaty for sharing military secrets.

″This is the most unthinkable alliance that became thinkable in a very short time,″ said Sam Albert, who heads a computer consulting firm in Scarsdale. ″These two companies have matured to the point where the benefits are easily seen by this alliance.″

The pact appears to be part of a broader realization among computer companies that users are rebelling against the industry’s hodgepodge of incompatible standards and products.

Some experts said an IBM-Apple collaboration could result in an vastly expanded menu of easy-to-use computers, from laptops to large machines, available to consumers and businesses within a few years.

The arrangement also signaled a profound shift in thinking at International Business Machines Corp. and Apple Computer Inc., which together control nearly half the market for personal computers. Historically they have detested and poked fun at each other.

″The significance is that the two most important standard-bearers in the personal computer industry have now hooked up and decided there are certain directions the whole industry should go in,″ said Paul Gillin, executive editor of Computerworld, a trade weekly in Framingham, Mass.

″They’ve made a big deal about going in different directions and now have decided the competitive situation is desperate enough so they should both lead the industry in the same direction.″

Apple, the brash upstart success story born 15 years ago in a Silicon Valley garage, is best known for its user-friendly Macintosh machines that have become a favorite of personal computer users.

The company’s loose informal culture contrasts with the starched-shirt correctness at IBM, the world’s largest computer maker, which once dismissed Apple as a minor competitive nuisance that sold machines to schools.

Still, when word leaked a few weeks ago that Apple and IBM were negotiating an alliance, many in the industry weren’t that surprised, given the anemic state of the industry.

IBM has been aggressively expanding relationships with other computer companies as part of an effort to become more creative, responsive and profitable. The company has announced ventures recently with Wang Laboratories Inc., Lotus Development Corp. and some smaller technology concerns.

Apple, frustrated in its attempt to break into markets dominated by IBM and other big companies with lucrative commercial clients, also has shown willingness to share its technology if that helps increase sales and profits.

Both companies have been particularly hurt by a slowdown in demand for computers and the broader impacts of the recession that began last year. Both have announced work-force reductions and offered cheaper machines.

″These guys are suffering and they look in the future and it looks bleak,″ Gillin said.

Apple and IBM disclosed the general principles of their agreement in a statement that described it as a letter of intent to create powerful new systems for the 1990s.

Part of the agreement calls for a joint venture in computer software that will simplify programming industrywide. The software will be based on object- oriented technology, a major change in the way programs are designed, which greatly reduces the commands users must give computers to perform tasks.

The agreement also calls for:

-Integration of Apple’s Macintosh computer design into IBM systems;

-The design and application of powerful new computer chips provided by Motorola Inc.;

-The promotion of software for multimedia technology, a fast-growing segment of computing that mixes sound, video, text and graphics, enabling users to push visual ″buttons″ on a screen.

Definitive contracts are expected to be signed later this year and further details will be released later, the companies said. Products resulting from the alliance should reach the market during the next two or three years.

Apple’s stock rose 87.5 cents a share on the news to $43.125 in nationwide over-the-counter trading. IBM’s stock fell $1 a share to $98.125 on the New York Stock Exchange.

Computer industry analysts have said they expect to see more cooperative relationships between computer companies because the industry is maturing and no single company has the resources to develop major products alone.

Some said the Apple-IBM move could hurt the competitive position of other big computer companies because of their combined dominance. The software joint venture, for example, directly threatens Microsoft Corp., the current leader, while the use of the Motorola chip is a challenge to Intel Corp. and Sun Microsystems Inc.

Joseph Krovisky, a Justice Department spokesman in Washington, said the department was evaluating the announcement for possible antitrust implications.

Others said they saw no competitive threat, pointing out that several leaders in the computing field have formed consortiums and alliances to promote industry standards and protect themselves from foreign competition.

″No one company can be equally strong in everything,″ said Jack E. Brown, a Phoenix-based lawyer who has handled copyright and antitrust matters for several computer makers.

″These companies operate against worldwide competition,″ Brown said. ″The kind of limited cooperation in terms of technology represented here is the kind of thing that’s easily tolerated among world players.″

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