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THE COMPUTER REVOLUTION IS TRANSFORMING BUSINESS

 NEW YORK, May 26 /PRNewswire/ -- The technological revolution is radically transforming the computing industry and businesses worldwide. The changes have overwhelmed such leading companies as IBM, Digital Equipment, and Compaq Computer.
 Apple Chairman John Sculley denies having any sense that his company is similarly threatened. Nevertheless, he confirms reports that he sought to merge with IBM earlier this year when discussing his candidacy for CEO of rival Big Blue. To strengthen both companies, Sculley said, Apple should merge with what he calls "the best parts" of IBM. "We had all the pieces to put together a very strong business," Sculley says. "The problem was that IBM's stock continued to weaken, so to acquire Apple would have meant too much dilution. In my view they had a much greater chance of being successful with Apple on the IBM team."
 So reports FORTUNE senior editor Stratford Sherman in "The New Computer Revolution," the cover story of the June 14 issue of FORTUNE, on newsstands May 31. Sherman looks at successes and failures that have rocked the computer industry and hold critical lessons for managers in every business. This is the first comprehensive report on the entire scope of the $360 billion computing industry, and the seismic changes that are convulsing every segment of what FORTUNE calls the most important industry in the world.
 The most visible upheaval in computing has been in the transfer of vast wealth from one near monopolist, IBM, to two others: Microsoft and Intel. Though still the world's No. 1 producer of mainframes, minicomputers, and PCs, Big Blue has lost two-thirds of its market value -- over $70 billion -- since 1987. The challenge of realigning this company with the needs of its customers is enormous. At a cost of over $15 billion, IBM has shut down a quarter of its manufacturing plants and let go 100,000 employees, 25 percent of the peak total.
 The company is still losing money, and some knowledgeable IBM watchers suggest that the new CEO Lou Gerstner must cut another 100,000 jobs and close still more factories to get costs in line. Gerstner should be able to restore profitability more quickly and easily than most people expect. Those jobs cuts alone could add $4.5 billion to after-tax profits. IBM has an excellent chance of becoming a service provider and rebounding, but it may never fully regain all the market value it has lost.
 The computing industry has reached an historic pivot point: The cost and performance of hardware, as well as the power and ease of software, have all come together. The microprocessor is the weapon of revolution that has suddenly brought forth $2,000 PCs as powerful as $1 million mainframe computers. In the process it is destroying hundreds of thousands of jobs, unseating star CEOs of venerable monoliths, reshuffling tens of billions of dollars of shareholder value, and setting off upheavals that will wrack the 50,000 computing companies -- and all their customers -- through the end of this century.
 "This is the information age, says Microsoft CEO Bill Gates. "If your business has anything to do with information, you're in deep trouble."
 More than any other agent of change, information technology is the engine transforming the way business works. It is helping companies get leaner, smarter, closer to the customer. Those who seize the opportunities inherent in this revolution are capturing important competitive advantages, those who don't will have to race to catch up, or die. That change has swept through the industry, and it will soon transform virtually every other business known to man. So get ready for tougher competition than you've ever imagined.
 Sherman outlines five management principals that emerge from the startling changes in computing:
 -- The new mantra: Don't lose touch with the customer.
 -- Even in a high-tech industry, management skills are more important than technology.
 -- Today's successes often obscure the first signs of tomorrow's failures.
 -- The company with the highest unit volume almost always wins.
 -- The place to find unit volume is the bottom of the market, where low prices create new customers.
 Sherman reports from the battlefront in each of the computer industry's main beachheads: Personal computers, an industry which has mushroomed to 135 million machines worldwide and is in the grip of ferocious price wars. Workstation, where high-powered desktop computers have become a $9-billion-a-year industry where terror will reign as the business consolidates. Minicomputers, now that workstation, PCs, and laptops are so powerful, these machines -- in effect, smaller mainframes -- are hard pressed to offer competitive performance at an attractive price. Mainframes, IBM has 75 percent of the market where prices are 30 percent lower than a year ago. The once fearsome Japanese are suffering too. Software, a battle among competing operating systems, including Microsoft's Windows NT, will decide the shape of this market for years to come. Microprocessors, this is Intel's home turf, where the second great battle to control the future of computing will be staged.
 Just half a century after the computer was invented, less than 3 percent of the 5.5 billion people on this planet own computers. The enormous opportunities to enrich companies and to change our lives are just beginning to be tapped.
 Sherman's article is the first of FORTUNE's expanded coverage of the information technology industry. Starting with this issue, there will be a regular information technology section as well as three ten-page quarterly reports and a special issue on I.T. to published September 27.
 -0- 5/26/93
 /CONTACT: Emma Dockendorff, director of public relations - FORTUNE, 212-522-3622/


CO: Fortune Magazine ST: New York IN: PUB SU:

TM-LD -- NY076 -- 2690 05/26/93 18:25 EDT
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