American History 1988
Chapter 283 - 273: The Best Timing

Chapter 283: Chapter 273: The Best Timing

AOL’s IPO was generally a success, even though the closing price on the first day ultimately remained around 18 US Dollars.

But at its peak, the stock price had exceeded 23 US Dollars, indicating that the market had a certain degree of recognition for AOL.

In an era where the internet was just starting, maintaining a market value in the 1 billion dollars range was already quite an achievement for AOL.

Steve Case and his team were satisfied with the IPO result, after all, AOL was very young, with a mere 142 employees.

However, with the 60 million dollars in financing obtained, Steve Case was already considering how to expand the scale of AOL.

The NSF Network was slowly exiting the historical stage, and the tide of internet privatization was in full swing.

For AOL, it was also an excellent opportunity to launch a major attack; the timing of the financing could not have been better.

Of course, it was now August, and by the time AOL digested the adjustments brought about by the IPO, it was estimated to be the end of the year.

Therefore, the large-scale expansion plan should be implemented next year, and Dean was also looking forward to this outcome.

Wall Street and ordinary investors believed that AOL would not make any major breakthroughs in its operations for the time being.

The current market value was already a very optimistic estimate, and it could be a long time before AOL’s stock price increased significantly.

Normal development should be a steady climb, then after reaching a certain scale, start competing with Bell America for the leading ISP operator position.

Including within AOL itself, Steve Case and his team shared the same thought; the internet was not really a hot concept at the moment.

But Dean knew that the upcoming development would surprise everyone.

The rate of internet adoption, the rapid changes in networks, and the public’s thirst for online content would all exceed everyone’s expectations.

So the 1 billion dollars market value was just a starting point for AOL.

Now there were already signs of this. Just today, the CIX Alliance was about to have its first negotiation with IBM on network operations.

The speed of events’ developments was somewhat unexpected, even Dean had not foreseen IBM surrendering so quickly.

According to the alliance’s internal estimates, IBM, holding a massive amount of NSF Network resources, could at least hold out for a few years.

But carefully calculating since the establishment of the CIX Alliance in 1990, only two years had passed.

It was 1992 now, three years away from the final date in 1995.

The once domineering IBM, which had declared to reject all other operators, was actually taking the initiative to seek peace?

If one looked at IBM’s current predicament, it was not hard to understand why it had come to this.

Firstly, looking at the policy set by IBM’s networking services division, ANS, one knew they would not monopolize the network services sector.

Although they controlled a large amount of the NSF Network’s backbone, IBM made this circle very closed.

If you wanted to use the network, you had to pay IBM, and pay by traffic at that!

Do you think that’s all? In addition to network service fees and traffic fees, there were exorbitant equipment patent fees waiting for numerous enterprise users.

As stated earlier, IBM forced its enterprise users to use routers manufactured by IBM.

These routers usually contained many IBM-exclusive patents, which led to prices that were typically 3 to 5 times more expensive than those of Cisco or 3Com!

If these enterprise users had no choice but IBM, they would probably pinch their noses and accept it.

But unfortunately, there were too many people against IBM.

So, with Dean facilitating things, the CIX Alliance was opportunistically established.

The numerous operators in the alliance, following the original criteria set by everyone, only charged users service fees and did not charge by traffic.

In addition, they interchanged data with each other, connecting the entire North American network geographically and hardware-wise.

Finally, regarding equipment such as routers and gateways, the CIX Alliance could make recommendations, but would never force users to choose a particular brand of equipment.

Under such an inclusive and open policy, the network users who soon joined chose operators within the alliance.

Moreover, with the seven Bell companies joining the alliance to provide network lines for the many operators,

The NSF Network backbone previously controlled by IBM no longer constituted an advantage, the CIX Alliance had filled in its last remaining gap.

Under the impact of low prices, quality service, and interconnected data, the clients that originally belonged to IBM shifted en masse to the CIX Alliance.

After all, for many users, as long as their needs were met and the cost was low, that was enough.

The direction of the market shifted rapidly, and in fact, by June, IBM had already found itself isolated.

Its initial proclamations had precluded the possibility of other operators joining the IBM camp.

Finally, after a hard push for two months, the head of IBM’s ANS department, which was responsible for network services, Cohen, initiated contact with the CIX Alliance.

There was no choice; if things went on like this, IBM’s clients would soon be gone.

Now was IBM’s most trying period, so the blue giant had no alternative but to lower its proud head.

"Dean, have you heard? Wall Street is analyzing the possibility of IBM’s bankruptcy!"

Steve Case, who had just completed AOL’s IPO, was truly riding high.

He was not only ambitious in his career but had also treated himself to a brand-new Rolls-Royce sports car in his personal life.

It was parked downstairs, its silvery gleaming body almost the brightest spot in the parking lot!

If it weren’t for the restrictions on his stock, Steve Case might have even bought a new house for himself.

At this moment, the contrast between AOL’s glory and IBM’s predicament provided Steve Case with a sense of unbridled elation.

A few years ago, a mere flick of their fingers could have crushed AOL’s existence, yet here they are, actually coming to us on their own accord.

Dean could understand his sense of pride but wouldn’t actually underestimate IBM.

"Steve, that’s just an analyst’s sensationalist statement. IBM’s situation is indeed very bad, but it’s not on the verge of bankruptcy."

"But that’s what the newspapers are saying." Steve Case lifted the newspaper in his hand.

The rumors of IBM’s impending bankruptcy had been rampant recently, primarily because its stock price had fallen so sharply.

In 1990, its market value had peaked at over 60 billion US Dollars, ranking third in America.

By 1991, its market value had shrunk to just over 40 billion US Dollars, and its ranking had dropped to eighth.

This year was even worse; IBM’s market value was only around 30 billion US Dollars, which kicked it straight out of the top ten.

Because its market value had drastically decreased for three consecutive years, Wall Street began to grow bearish on IBM, with various media outlets joining the frenzy.

The primary reason for all this was IBM’s own business troubles.

As technology developed, server architectures dominated by personal computers had become capable of performing tasks previously handled by mainframes, and even exceeding them.

Worse yet, IBM had abandoned the personal computer business early on, and its market share had been completely divvied up by competitors.

As a result, IBM faced severe losses and began its first major round of layoffs in its history.

Furthermore, there were significant problems within IBM itself, due to its long-term dominance in the computer industry.

From top to bottom, its employees were accustomed to a comfortable environment with high benefits, resulting in a bloated, bureaucratic organization plagued by redundancy and severe infighting.

There was a joke commonly shared among IBM employees that vividly described this issue.

How long does it take to move a cardboard box from the second floor to the third floor in the company?

The answer is several months!

Because to move a box, you first have to write a report and then go through multiple layers of approvals.

After approvals, the report goes down through the chain of command, and eventually, it’s handed over to the moving company contracted by IBM.

On the moving company’s schedule, last month’s task might not even be completed yet.

So, if this month’s task can be done in a month’s time, that would be quite an achievement.

Therefore, taking several months to move a box isn’t surprising at all.

This is a true representation of the cumbersome and rigid internal workings of IBM, and it is no exaggeration.

However, even so, IBM hadn’t reached the point of bankruptcy yet; in Dean’s view, what it needed more was an internal reform.

As for the losses, for a company as large as IBM, they wouldn’t be fatal in the short term. It could hold up for three to five years without a problem.

"IBM isn’t so easy to bring down, don’t forget it has the defense department among its clients."

Dean’s remark immediately left Steve Case speechless.

Indeed, IBM is one of the federal government’s most important contractors.

Even if it lost all its external market, it could still live quite comfortably.

"So, IBM won’t compromise that easily this time?" Steve Case slowly reined in his smile.

"Not necessarily," Dean said with an optimistic smile, "because internet services aren’t IBM’s core business."

The main source of revenue for the Blue Giant is hardware and accompanying software; they might not regard internet services with much importance.

Seeing Steve Case’s expression warming up again, Dean picked up some documents and patted his arm.

"Alright, instead of sitting here making wild guesses, let’s go and meet them." With that, Dean headed for the meeting room first.

Today, they were here for negotiations. Both parties were soon to meet and discuss the issue up close.

With the growth of the CIX Alliance, they had imperceptibly reached the point where they could make IBM come to them.

Half an hour later, in AOL’s largest conference room, it was packed with people.

When IBM’s Cohen entered the room with his assistant, he was startled by the scene before him.

The conference room was divided into two halves facing each other, one half filled with desks and chairs and not a single empty seat.

The other half, however, was rather empty, with only a lonely desk and chair.

Clearly, without even needing to look at the nameplates on the tables, Cohen knew that the empty desk was meant for him.

"Sorry, you didn’t tell me there would be so many people attending the meeting."

Cohen’s expression was serious, as he believed this was a deliberate confrontation by the CIX Alliance.

"Mr. Cohen, we come with the utmost sincerity to negotiate the future of the internet. But it seems IBM doesn’t care much?"

Dean pointed to the nameplate in front of each person’s seat. "Each of them represents an internet service provider. Isn’t that sufficient to show how seriously we take this?"

Cohen was taken aback, then quickly scanned the room.

Alright, he had initially thought those in the back were just spectators, but to his surprise, they were all his competitors!

Frankly, it was the first time Cohen realized there were so many internet service providers in America; he roughly counted at least thirty people sitting here.

At this moment, the only question in Cohen’s mind was, how did so many operators manage to get along and come together?