businesses. This move was prompted by the decline of the industry growth rate from double digits to zero in 1991, technology changes that reduced the need for human and physical capacity in manufacturing, increasing domestic and international competition, and the shift in the computer industry towards standardization, cutting profits. IBM's profits peaked at $6.5 billion in 1984, then fell to $172 million in third quarter 1991, only marginally more than Microsoft's $177 million in the third quarter, although IBM is over 40 times the size of Microsoft. In addition, IBM faced the possibility of an earnings decline for the first time in 40 years. IBM's fortunes have been linked to the fact that US government and large corporate purchases of multimillion dollar mainframe computers have declined in absolute terms since the mid 1980s. Industry executives link IBM's problem with its focus on mainframe computers, which are being eclipsed by speedier microprocessor chip based technologies. and IBM has never had the same control over the personal computer market that it has had over its small group of customers for mainframes. The company has also lagged in entering the fastest growing sectors today scientific and engineering workstations and notebook computers ("IBM announces a sweeping shift in its structure: giant fights stagnancy," 1991).
One of the key elements in the reorganization was a downsizing effort that recognized that the company had become bloated and that its workforce had to be reduced. In 1991, the company eliminated 20,000 jobs. It was predicted that another 20,000 would be eliminated in the first months of 1992. ("Moneyline: IBM Cutbacks?" 1991). In August 1992, it was announced that another 18,000 workers would be eliminated by the end of 1992. This job elimination was becoming a concern to customers who were uncertain about how service would be affected, particularly if there were reductions in service and s...