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...IBM would put its worldwide sales force and $7 billion in cash behind Notes, which dominates the market for so-called groupware and which, experts say, represents the next big advance in personal computing. By using Notes, teams of workers in different offices-or even different countries-can call the same documents to their computer screens and work on them together. Lotus commands fully 65% of all sales of groupware, which total about $500 million at present and are expected to balloon to $5 billion a year by the end of the decade. "Today, Notes is the only game...
That would give Gerstner an ideal weapon for challenging industry giant Microsoft, which dominates most other parts of the desktop software business. Not only would IBM reap increasing revenues from sales of Notes, but other software companies could use it as a "platform" on which to build their own programs and thereby turn it into a global standard. "In this industry he who is first garners an enormous amount of benefit," Gerstner says. But Microsoft chairman Bill Gates, who plans to roll out a groupware program called Exchange later this year, dismissed the IBM-Lotus alliance. "I just...
...biggest skeptic was Lotus chairman Jim Manzi, 43, who had spurned an IBM merger offer in January and learned of the takeover attempt in a phone call from Gerstner at 8:25 a.m. last Monday, five minutes before IBM went public. Manzi swiftly hired investment banker Lazard Freres to plot defense tactics and search for a white knight, such as AT&T or Hewlett-Packard, that would rescue Lotus. No savior had appeared by week's end, however, and Manzi seemed resigned to coming to terms with IBM if it would sweeten its offer. Wall Street watchers expected IBM...
...prevails, however, IBM will gain a company that is struggling to hold on to its original niche. The Lotus 1-2-3 spreadsheet was the first blockbuster for PCs but has since been eclipsed by Microsoft's Excel. Lotus fell behind in spreadsheets and other programs, such as word processing and graphics, by being slow to develop software for Microsoft's Windows operating system, which now runs 90% of the world's desktop computers. Although programs like spreadsheets accounted for two-thirds of Lotus revenues of $971 million last year (Notes and other communications software made up the rest), declining...
Among the big challenges for IBM will be to maintain the allegiance of crucial talent like Ray Ozzie, the creator of Notes, who spent 10 years developing the software. "The downside of IBM is that it takes 42 people to make a decision," says Mitchell Kapor, the founder of Lotus, who now is an adjunct professor at M.I.T. "If that happens, Ray will throw up his hands." Gerstner tries to sound reassuring. "We certainly don't want to suck Lotus into the giant company that IBM is and destroy what makes it so successful and unique," he says. "They...