US vs IBM Exhibit 14971 part 2 Jul80 pdf

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[7/22/80J

Historical Narrative The 1960s

Table of Contents

IV. IBM's Systern/360 and the 1960s 34 . IBM

a. b.

3000 Seri~s and th~ Spread Committee The Spread Repo"l'

(i) Price/Pe~ ..Jrn. logical LeadE:

'nd S/360 . . . . . ~ and Techno-a.4ip--Generally (ii) Systern/360 Component Technology

269 269

27]

278

279 282 (iii) Single Family for All Applications 290

(iv) System/360 Compatibility (v) Emulation

(vi) Systern/360 Soft\..;are

(vii) System/360 Peripherals .

(viii) Standard Interface/Modularity Appendix: Examples of System/360 Uses 35. The System/360 Commitment . . • .

a. Preparation for Announcement

b. 360's Success and Impact on IBM.

36. Initial Competitive Responses to System/360

a. RCA

.

. . .

_·

_{· ·}

.

_·

.

b. GE

_·

_{· ·}

_{· · .}

c. CDC

.

. .

.

_·

_{· . . ·}

_·

.

·

296 304 311 314 332 Al

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d. Sperry Rand

.

-e. Burro~ghs

f. Honeywell

.

. . . .

.

. . . . .

g. SDS

. .

.

. . .

.

37. IBM's Responses (1964-66)

.

a. Reduction of Extra Shift Usage Charges . b. l1C!l1ory Improvements . • ~

c. Tape Drive Improvements •.• . . d. Disk Drive Improvements •

e. Introduction of the Nodel 20

.

. . .

f. The Model 90 Program g. The 360/44

h. The 360/67

38. Educational Allowances

IBM's Educational Support Programs

39. IBM I S UnDundling

. .

. .. .

.

. . .

.

a. Introduction

.

. . . .

..

.

b. The Continued Demand For Bundling

in the 1960s • • • • • • • • • • • • c. IBN's Unbundling Announcement.

40. Sperry Rand/Univac

a. univac's Problems in 1964 • • b. The 1108

c. The Product Line Task Force .

2

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d. The 9000 Series • •

.

. .

.

e. Univac's Success in the Late 1960s 41. General Electric

. . .

. .

. . .

.

42.

a. The GE 400 Series • b. The GE 600 Series

c. Time Sharing

· .

.

d. False Starts

· .

.

e.

The

Management of GE's Computer'Operation . f.o GE IS Position in the Late Sixties • . • • •

h.

?he Ventures Task Force and the Decision to Disengage • • • • ~ • • • • • • • •

i. Did GE Lose Honey

_{· ·}

RCA

.

. .

_{· ·}

a. RCA 3301

. . . . . .

b. The Spectra 70 Series

_·

·

(i) Compatibility with System/360 (ii)

. (iii)

Commercial and Scientific Ability of Spectra 70 Series . • • • • • Problems with Spectra 70 Series

· · . .

· . .

·

· ...

(iv) RCA Success with the Spectra 70 Series

c. RCA Computer Systems Division 1969-1971

d.

(i) (ii) (iii)

Changes in Management Personnel and goals • • •

The RCA Series . . . • • • . • . Computer Systems Division's Prob1ems--Early 1970s • • • RCA's Decision To Sell Its Computer Business To Sperry Rand . . • . • •

Page 482 486 488 490 493 505 512 516 523 533 543 547 547 551 552

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43.

44.

e. After the Sale to 'Sperry Rand • •

f.

(i)

(ii)

RCA's ~ctivities • • • • •

Sperry Rand's Success with RCA's Computer Systems Division • • • Conclusion

HoneY'vel1 •

a. The 200 Series

b. Problems and Solutions (i) Otlv~r Systems (ii) r~ri~hs~als

c.

Marketing Practices

d. Product and Service Acquisitions and Expansion • • • •

Burroughs • •

4

615

616

619

626 626 628

630

632

638 a. Burroughs in 1964: Problems and Changes 638

(i) Reduction of Expenses

(ii) Increased Product Development b. Computer Development 1964-1969

(i) The 500 Systems Family • (ii) Smaller Computers

(iii) Peripherals

.

. .

.

c. Burroughs at the End of the 1960s • 45. National Cash Register

46. Control Data Corporation (CDC)

a. CDC's 6000 and 3000 Series Offering (1963-1969) • • • • • • • • • • • (i) The 6000 Series

640 642

643

644

650

653 654

657 670

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Page '(ii) The 3000 Series

· _·

_·

· _·

_·

677

-b. CDC's Expansion into Commercial

Data Processing

_{· ·}

· _{· · · · ·}

678 c. CDC's Expanding Peripheral Business

_·

_{· ·}

682 d. Data Centers

_·

_{· ·}

_·

· _·

_·

· · ·

_·

684 e. CDC's Acquisitions (1963-1969)

_{· · ·}

·

686 f. Conclusion

_{· ·}

_·

_{· ·}

_·

· _·

690

47. SLS

_·

..

_{· · ·}

_·

...

..

·

.. 091

a. The SDS Entry Strategy

_{· · ·}

_{· ·}

_·

693 b. The SDS 910

_·

· _·

_·

_{· · · · ·}

695 c. The Expansion of the SDS 900 Series

_·

696 d. The Sigma Series

_{· ·}

_·

_{· · ·}

_·

703 e. The Merger

_·

_{· ·}

_·

711 48. Digital Equipment Corporation

_·

713 a. PDP 1, 4 , 5 and 7

· · · · ·

· · ·

_·

· _·

718 b. PDP 6

_·

_{· ·}

_·

_{· ·}

_·

_{· · · ·}

_{· ·}

721

,J

c. PDP 8

· _{· ·}

· _·

_·

_{· ·}

_·

722

d. PDP 10

_{· · ·}

_{· ·}

_·

_{· ·}

_·

..

.

727

e. PDP 15

_{· ·}

_·

_{· · ·}

729

f. PDP 11

· · ·

_·

_{· ·}

729

g. Peripherals and Soft\vare

_{· ·}

_·

_{· · · ·}

731

h. Competition

_{· ·}

_·

732

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Page

50. The Emergence of IBI1 Plug-Compatible

Manufacturer (PC}l) Competition

_{· ·}

· _·

750

a. From OEN to PCH

·

· _{· ·}

753

b. PCr.! Entrants

· ·

· · ·

_·

· _·

_·

762

(i) Telex

· · ·

·

762

(ii)

Ampex

.

_·

_{· ·}

· _{· · ·}

·

765

(iii)

Mernorex

_{· ·}

_·

_{· ·}

_·

_{· ·}

767

(iv)

ISS

_·

..

_·

775

(v) CalComp/Centu" 'ata Systems

_{· ·}

_·

776

(vi)

Sanders Assr .Lat_, - Inc •

· _·

_{· · ·}

_·

777

c. PCB Price Competition and Success

_{· ·}

_·

780

51. Leasing Companies

_·

_{· ·}

_{· · · ·}

_·

797

a. An OvervieT,v of Leasing Company Operations

_·

797

(i)

The InvesL'"TIent Tax Credit

_·

800

(ii)

Harketing Costs

_·

_{· ·}

_·

801

(iii)

Capital Availability and Cost

_·

_{· ·}

_·

803

b. The History of Leasing Companies in the 1960s

.

_·

_{· · · ·}

_·

805

(i)

Leasing Company Growth

_·

_{· ·}

_·

807

(ii) The Emergence of Netv Challenges

_{· · ·}

814

(iii)

Diversification

_·

818

c. Some Individual Companies

_·

_{· · ·}

819

(i)

Greyhound

_·

819

(ii) Boothe Computer Corporation

_·

_{· ·}

_·

821

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7

Page d • . The Effects of Leasing Companies on IBM 826 52. Service Bureaus -• • • •

.

. .

831 a • Entry and Gro~vth

.

. .

.

831 b. Time Sharing and the "Computer Utility" 835 c. Competition • •

53. Software Companies

840 851 54. The Role of the Federal Government

55. Planning for New Products • • Introduction

Tape Drive Development: The 2420 and 3420 (Aspen) • • • • • •

c. Disk Drive Developments: The 330 (Merlin) I

866 878 878 885 2319 and 3340 nvinchester) . . . . • . 898

(i) The 3330· (Merlin) 898

(ii) The 2319 and 3340 (Winchester) 902 d. New Processor Planning

eNS

and System/3) 907 (i) Monolithic Logic and Memory 907

(ii) System/3. 911

(iii) Virtual Hemory . 913

(iv) NS Prices 918

e. Conclusion

. . .

.

. .

.

922

56. Growth of the EDP Industry 923

a. Increase in the Number of Users of Computers 926 b. Expansion by Existing Computer Users 928 c. Explosion of New Applications of Computers. 929 d. Improved Price/Performance and Ease of Use. 937

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IEM'S SYSTEM/360 AND THE 1960S

34. IBM. The 1960s for IBM was an era of great change,

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, I

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3: of great risk and difficulty and most of all a decade marked by the

t

·

4. ~ phenomenal success of IBM IS 'System/360.

*

T~e 360 story begins in it

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Several witnesses actively participated in the planning, develop-ment and execution of the System/360 program. Their testimony

provides us with a useful means of understanding this critical period in IBM's history.

Erich Bloch was the engineering.manager of Project STRE~CH from October 1958 to April 1961, and "was responsible for the circuit design and systems organization and implementation". (E. Bloch, Tr. 91468.) In April 1961, Bloch headed IBM's Advanced Technology Study Committee, which was established to recommend the appropriate logic component technology for future products. (E. Bloch, Tr. 91492.) From June 1961 to September 1964, Bloch led IBM's development of Solid Logic Technology and "was responsible for the development, design and pilot manufacturing of the SLT family of components and packaging and their manufacturingl1

• (E. Bloch, Tr. 9146 ':-.')9.)

Dr. Frederick P. Brooks, Jr., hired by IBM in 1956 as an engineer, helped to design the architecture of the STRETCH computer. (Brooks, Tr. 22650-51.) In 1960, Brooks became Systems Planning Manager of the Data Systems Division (DSD) and was responsible for developing "the plans and architecture" for the 8000 series. (Brooks, Tr. 22656-57, 22665.) Brooks served as Manager of IBM's New Product

Line project from 1961 until 1964 and was responsible for "think [ing] through the technological and architectural approach to a total corpo-rate-wide product line". (Brooks, Tr. 22656-57, 22666-67.) From early 1964 to the summer of 1965, Brooks was Manager of Operating System/360 (Brooks, Tr. 22673-74) and headed the design and develop-ment activities for System/360's progr~~ing support. (Case, Tr. 77966-67.)

I

Richard Case, in 1962, was a member of the Advanced Systems I

Group which was responsible for the design and development of System/

!

360, and personally headed the engineering group which was at that time! designing what was announced as the IBM System/360 Model 60. (Case, !

Tr. 72010, 73235-38.) During this time fr~ue, Case also served on I

IBM's Architecture Committee (Case, Tr. 72008-09; DX 3538), which was responsible for developing System/360's architecture. (Case, Tr. 72008-09.) Case's function on the Committee was to represer.t all of the 360 engineering groups. (Case, Tr. 72012, 73238.) In 1964 to 1965, Case was Assistant ~anager of OS/360 (Case, Tr. 77966-67;

DX 3538) and assisted Dr. Frederick Brooks (~anager of OS/360) in the

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IEM'S SYSTEM/360 AND THE 1960S

34. IBM. The 1960s for IBM was an era of great change,

I

3: of great risk and difficulty and most of all a decade marked by the

t

4. ~ phenomenal success of IBM IS 'System/360.

*

T~e 360 story begins in it

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24 *

Several witnesses actively participated in the planning, develop-ment and execution of the System/360 program. Their testimony

provides us with a useful means of understanding this critical period in IBM's history.

Erich Bloch was the engineering.manager of Project STRE~CH from October 1958 to April 1961, and "was responsible for the circuit design and systems organization and implementation". (E. Bloch, Tr. 91468.) In April 1961, Bloch headed IBM's Advanced Technology Study Committee, which was established to recommend the appropriate logic component technology for future products. (E. Bloch, Tr. 91492.) From June 1961 to September 1964, Bloch led IBM's development of Solid Logic Technology and "was responsible for the development, design and pilot manufacturing of the SLT family of components and packaging and their manufacturingl1

• (E. Bloch, Tr. 9146 ':-.')9.)

Dr. Frederick P. Brooks, Jr., hired by IBM in 1956 as an engineer, helped to design the architecture of the STRETCH computer. (Brooks, Tr. 22650-51.) In 1960, Brooks became Systems Planning Manager of the Data Systems Division (DSD) and was responsible for developing "the plans and architecture" for the 8000 series. (Brooks, Tr. 22656-57, 22665.) Brooks served as Manager of IBM's New Product

Line project from 1961 until 1964 and was responsible for "think [ing] through the technological and architectural approach to a total corpo-rate-wide product line". (Brooks, Tr. 22656-57, 22666-67.) From early 1964 to the summer of 1965, Brooks was Manager of Operating System/360 (Brooks, Tr. 22673-74) and headed the design and develop-ment activities for System/360's progr~~ing support. (Case, Tr. 77966-67.)

I

Richard Case, in 1962, was a member of the Advanced Systems I

Group which was responsible for the design and development of System/

!

360, and personally headed the engineering group which was at that time! designing what was announced as the IBM System/360 Model 60. (Case, !

Tr. 72010, 73235-38.) During this time fr~ue, Case also served on I

IBM's Architecture Committee (Case, Tr. 72008-09; DX 3538), which was responsible for developing System/360's architecture. (Case, Tr. 72008-09.) Case's function on the Committee was to represer.t all of the 360 engineering groups. (Case, Tr. 72012, 73238.) In 1964 to 1965, Case was Assistant ~anager of OS/360 (Case, Tr. 77966-67;

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-269-iI

1 :: the 1960-61 time ?eriod. ~.s we have seen, by that ti:ne IB:-l

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was marketing more than 15 different processors and at least

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seven separate lines of second generation computer systems.

:1

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4

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(See above, pp. 126-49.) The architecture of those systems was

1

5

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"quite dissimilar", as was their programming. (DX 4740, Evar.s,

6

liP.

3925.) Whatever software compatibility there was existed

'I

I,

7 I,only over a very narrow range of processor performance. I;

8 ;1 ;1

!I

-9 ildesign and development of System/360's programming support. (Case, i!Tr. 77966-67, see also Tr. 77977, 77982.) Case was a co-i~ventor on 10

I'

the original System/360 patent. (Case, Tr. 71998-99; DX 3538.)

11

II

Bob

o.

Evans was Director of Systems Development and

Pla~ning

II

for DSD from early 1961 to mid-1962 (Evans, Tr. 101269; DX 8081 (Tr. 12 11101035)), and initially responsible for "personally evaluating . . .

'I

the 8000 series" and deciding whether IBM should pursue the project.

13! (Evans, Tr. 101269.) During this period, Evans also served as Vice-iiChairrnan of the SPREAD Committee. (Evans, Tr. 101270; DX 1404A, t'. 3

14!!

(App. A to

JX

38).) In the 1962 to 1965 time frame, Evans was Vice-tjPresident of Development for eSD (DX 8081 (Tr. 101035)), and assumed 15

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"worldwide responsibili ty for coordination of the development" of

:1 System/360. Evans, Tr. 101061.)

16

!I

:1 Paul W. Knaplund was Manager of Systems Marketi:1g for the Da ta 17

:i

Processinq Di vision (DPD) in 1960 and was responsible for

understand-!jing and i;forming IBM's product divisions of ~the functions and 18 ;~ prices necessary for IBM products to be economically attractive t':J

:!users". (Knaplund, Tr. 90467, see also DX 9033 (Tr. 90458).) In the 19 :1 latter part of 1960, Knap1und became Manager of Systems Development

llfor the General Products Division (GPD) and was responsible for pro-20 ;1 jecting profitability for and meeting profitability objecti~Tes of

ilvarious IBM products, including the 1401 and 1620 processors and !3~

21 !!unit record equipment. (Knap1und, Tr. 90464-68; see also DX 9033 '; (Tr. 90458).) In 1963 Knaplund was named Assistant Group ExecutiiJe, 22!Product and Profit Planning for the Data Processing Product Group ~p~

:i

(Knap1und, Tr. 90474: OX 9033 (Tr. 90458)), and "was directly in~]'lJlved; 23 :Iin the preparations and discussions that resulted. in the System 360

,announcement of Aoril 7,1964". (Knaolund, Tr. 90474-75.) In t::e 24 ::1964 to 1966 ti:ne- frame, Knaplund ass~rned further executiile

respc:1si-~ibilities as Vice President and Group Executive of the Data Precessi:::r 25 ilproduct Group, and as "Jice President and Group Executive of the

-:!Svstems Develoornent and :1anufact.uring Group, which reauired hin 'Ite

II d~al with functional, pricing and schedule - issues" reiati:1g to SyS't2!:1 11360 and othe= ?roducts. (E<nap1u:lc, T::-. 90468, see also DX 9033

! (T=. 9045:3).)

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-270-In addition, the input/output equipment had been developed

II

2 !I"almost uniquely" for each processor in order to optimize the

perfor-I,

3 !Imance of each of tbe different system types. II

II

(DX 4740: Evans, Tr. 4

Ii

(Telex) 3925.) The result, of course, was a very limited flexibility

1·

S

I!in attachment possibilities. As Evans testified, because peripheral

6 :!eQUiPment differed for different families or attached in different

Ij

7/lways to different processors, customers "had great

diffi~..11ty

in

mov-I'

8 !Iing even from one member of a processor in one family to another, let

9 !!alone moving from one family type to another". (DX 4740: Evans, '!r.

10

!i(TeleX)

3925-26.)

In this regard IBM's computer systems were no

dif-11

I

ferent from the computer systems of its compecitors.

(See pp.

156-70,

I

12

11203-11, 229-37,

above.)

The result of this situation was that

cus-13 Iitomers generally acquired set systems and had very little flexibility

14 lIto change their configurations as business demands changed.

'I

15

I!

a. 8000 Series and the SPREAD Committee. In the early

11

16 i11960s, IBM's General Products Division (GPD) was responsible for the

" d

17 lldevelopment and manufacture of IBM's small and intermediate systems,

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18 !;such as t!1e 1401 and 1620, as well as IBM's disk drives. (Knaplud,

ii

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Tr . 90464-65; DX

I,

13890, pp. 16, 18; see also DX 1404A, p. 10 (App. A

20 lito JX 38).) IBM's Data Systems Division was developing and manufactur 21 jl. I!~ng IBM's la=ger systems, the 7000 Series, as well as IBM's tape

:1

22 q(DX 4740: Evans, p. 3919; DX 13890, p. 16; see also DX 1404A, p. 10

it

23 :1 (APt>· A to JX 38).) DSD and GPD were achieving great success in the

I

24 dmarketplace with their current linp~--9articularly with the 7090 and

25

[11401. (DX 1404A, pp. 81-82, 85, 86, 89 (App. A

to

JX 38).)

In fact,

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lithe 1401, which had been announced in October 1959, was the most

suc-2 IlcessfUl computer system that IBM had ever introduced, with domestic II

3 Ilshipments of more than 1600 by year end 1961.

II

(DX 1404A, p. 75

4

II

(App. A to JX 38);

ox

2609B, p. 94.)*

I.

5

II

Nevertheless, neither of the Divisions was resting on its

6 !Ilaurels; they were planning for the future. If IBl1 was to conti.nue

7

lito compete successfully, it would have to commit itself to the

devel-i

8

lopment of even better products. Such a commitment would require large

I

9 Ilfinancial investments by IBM. T. J. Watson, Jr" IBM's Chairman, 10 IjfullY understood this requirement and reported the following to IBM's

11 IjManagers in an April 24, 1961, Management Briefing:

II

12

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13

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14

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II 16 "

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n[OJur competition is getting stiffer all the time . . . . The best way to meet this competition is to keep our prices

competitive. Prices involve costs and earnings . . . . We need constantly to spend :arge sums in research and development of new products which will not produce revenue for some years to corne. Without funds for this vital expense, competition would eventually surpass IBM." (DX 8886, p. 43.)

Thus, within both divisions, improvements and extensions to

then current product lines were being developed. At GPO, Engineert Manager Ernest S. Hughes, Jr. (DX 1399, p. 2 (Tr. 33869)), had

19 l!set up two groups of engineers--one to pursue improvements to the

II

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20 111400 family and another to outline and define a replacement for the

21111400 family. (Hughes, Tr. 33915.) At DSD, development was even

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22

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further alone.

II A machine called the 8106 had been under design for

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23 "some years and was already under construction within DSD when

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24 iI _______________________ __

II

2511

*

~Ale

are aware that DX 2609B is not in evidence but v-Te rely on it

!I because it represents a s".,.;orn response by a.n IBM executive which

11'1 reflects information taken from IBM t s accountincr books and records.

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,

Dr. Frederick P. Brooks, Jr., came to the Division in 1960 as Systems

Planning Manager. Thereafter, IBM began to develop the 8106* into a

series of machines called the 8000 Series. (Brooks, Tr. 22771.) By

• i 1961, IBM had spent many mill;i.ons of dol'lars en t.he 8000 Series

'!.

development. (Evans, Tr. 101047.)

I

: J _'1 Despite the relatively advanced state of the 8000 project

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and the money IBM had already invested in it, there was "vigorous

, 'I

I :1 debate" within the company over !,yhether the 8000 ~vas the right way to

~: proceed. (Brooks, Tr. 22665-66.) With the first elements of the 8000

I

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nearing annour.cemen t , B. O. Evans, who at tha 1:: time was D irecto r 0 f

~ :\ Systems Development and Planning for DSD, was charged with evaluating

, ;1 the 8000 to determine ~vhet.1.er i t was a "leadership" program. (Evans,

- 'I

l -I Tr. 101045-46, 101269.) Evans was charged by DSD's Group Executive, ~:IT. V. Learson, to get the 8000 into produc~ion if it was the right

::1

thing to do or, if Evans thought the 8000 Series was the wrong

~ :1' approach, to do what was right. (Evans, Tr. 101046.) Evans concluded

:

,

..

:~!' that the 8000 Series was "wrong" for a variety of reasons:

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-One, the family was based on "contemporary transistor

tech-nology" and would not be "far-reaching enough". In Evans' vier,y ,

it would have been a "terrible mistake" to build a new family of

machines that could be rendered obsolete by competitive products'

incorporating much better transistor technology that ".,ould soon

be available. (Evans, Tr. 101048; see also OX 4773, 9. 3.)

*

The 8106 was an outgrowth of the STRETCH program.

22771. )

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11

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~, the 8000 had a "lackluster" plan with respect to peripherals. (Evans, Tr. 101048-49.)

Three, the 8000 Series was planned to be "a range of five 4- different machines: a small scientific machine, a small business

9-10

II

machine, a medium to high performance business machine, a higher speed scientific machine . . • [aJ superspeed scientific machine. II

(Evans, Tr. 101051.) Evans thought that offering this "collec-tion of differing machines with kind of loose ties . . . in

their structure" was "a basic mistake from the user's standpoint". (Evans, Tr. 101049.)

Although Evans believed that the 8000 Series would be

an

improvement

12

It

over IBM's existing product line and might give IBM a "momentary

13 : advantage" over competition, he recommended its cancellation. (Evans,

l~: Tr. 101049; see also OX 4773, p. 1.) On June 27, 1961, W. B. McWhirteI

15 11

wrote Learson that IBM's Regional Managers had been apprised of the

~ ;, reason why the 8000 was withdrawn: 10 II

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18

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!\ 19 :I

If [T] he' 8000 Series offered insufficient advances to insure

our competitive position at this time--[it] is being replanned with new ~echnology to provide a major breakthrough . . . . "

(DX 14059.)

In late 1961, T. V. Learson, then IBM Vice President and

:1

20 :, Group Executive, appointed a task force called the SPREAD Committee

:1

?1 'I •

-- '! to develop a new plan for IBM's data processing products during the

,j

Z2.

:i

19 6

as.

" (JX 38, p. 2; see DX l404A, p.

7

(App. A to JX 38).) Its

?_ :1

~ :,Chairrnan was J. W. Haanstra, Vice President of Development for GPD Ii

24 '!

and its Vice Chairman was Evans, who had become Director of Systems

,i

25 ;1 Development and Planning for DSD. (DX 1404A, p. 3 (App. A to JX 38);

"

(15)

-274-.1

- ! DX 8081 (Tr. 101035).) Other members of the SPREAD Committee included

~; Dr. Brooks and J. W. Fairclough, Manager of Product Development at i

r:

IBM's Hursley Laboratory in England,·' who had been in charge of yet

~' another processor development, the SCAMP.·* (Tr. 71984-85; DX 4779.)

The Committee issued a report of its recommendations in December

1961. (JX 38, p. 2.) That report

is

Exhibit A to the System/360 Stipulation of Fact (JX 38) and

is

also Defendant's Exhibit l404A.

The SPREAD Committee recommended "termination of the

prolif-eration of IBM products and t.~e development of a family of compatible processors which would employ a common technology (Solid Logic

1.: Technoiogy or SLT), a compatible set of peripherals and a compatible

-~

...

1

program operating system". (JX 38, p. 2.) The report and recom-mendations of the SPREAD Committee were accepted by IBM management

• The remaining members of the SPREAD Committee included D. T.

Spaulding, Group Director of Product Line for the Data Processing Group; J. D. Aron, Programming and Technology Coordination Manager for FSD;

W. P.

Heising, Programming Systems Planning Manager, Develop-ment for DSD; H. 'Hellerman, staff member, IBM Research; W. H. Johnson,· Director of Product Evaluation, Corporate Headquarters; M. J. Kelly, Senior Engineer and Technical Advisor for GPO;

o.

V. Newton, Manager, Mathematics and Programming for DSO; B. G. Oldfield, Manager, Systems Development for FSO; S. A. Rosen, Oata Processing t1anager for the Queens IBM New York Branch Office; and J. Svigals, Manager, Systems t1arketing for DPO. (Trf 71984-85; OX 1404A, p. 3 (App. A to JX 38).)

**

SC&~p was an experimental computer built in 1960 by IBM's Hursley Laboratory in England. (JX 38, p. 5.) SC&~p's control function was

implemented by the technique of microprogramming. (Id.) Although

the SC~~ project was cancelled in favor of System/3~(DX 4779, pp. 2-3), Fairclough was able to convince the SPREAD Committee of the benefits of microprogramming, which the Committee adopted as the principal means of implementing control functions in Systern/360. In addition, because microprogramming techniques were better known in IBM's British lab than in the United States labs at that time, design of the Model 40--which was the lead System/360 model in development--was assigned to Hursley. (Brooks 1 Tr. 22806-07.) (The importance of

(16)

-275-1; and the development of the New Product Line (NPL), which ultimately

Z!

became System/360,* began in 1962. ( JX 3 8, P ~ 3.) ,

3: ! The principal alternative course of action, which the

~ SPREAD Committee considered and rejected, was the addition of improved

s:

successors to the then existing product lines, rather than

develop-5

ment of an entirely new line. (Case, Tr~ 73571.) The one course of

i

7

II

action that IBM could not afford to take was simply to maintain the ,t

11

8

! status quo and continue marketing its current products. That much

I

g.~ was plain from the "product survival charts" incorporated in the I

la!

SPREAD Report. (DX l404A, pp. 73-91 (App. A to JX 38)~) Those

11 !

charts "showed that all of the existing products in the IBM product

tZj!line were

estL~ated

to have very short lives, that they would be very

13

II

quickly coming out of users

I

installations • . .

(bl

ecause other

l~: systems ~anufacturers were developing new and better products and i

,= :

that the evaluation was that all of the existing product line was

~!I

15

'Ivery rapidly heading toward being non-competitive". (Evans, Tr.

I

17 11101271-72 •. )

18;1

According to Paul Knap1und, the "'Product Survival Charts'

"

Ii

1/

19

:i---

:1

t

20 'I

*

The processors included in the April 7, 1964, System/360 announce-,Iment and their NPL designations are set forth below:

System/360 NPL Designation

2030 101

2040 250

2050 315

2060 and 2062 400

20iO 5 0 1 ( JX 3 8, ~r 4, p. 3.)

(17)

-2i6-L; • • ' • projected displacement of both announced and planned to be

Z;

announced IBM central processing units (CPU's) by newer products as

l!

users' needs grew and changed and as new technologies and equipment ~f features enabled'electronic' data processing (EDP) suppliers to offer

I,

~I· improved products. Those charts demonstrated • • . that IBM had to 6::,move rapidly ahead with the development, of a new line of CPU's or

11

7il else competition would soon displace IBM's EDP business". (Knaplund,

:1

a :

Tr. 904 73 • )

The survival chart for the 1401 (DX l404A, p. 75 (App. A to

10

i

JX 38» made the point graphically. This most successful of IBM's

;

11 : systems, announced only two years earlier, was projected to reach a i

~! peak of installations by

!I

1965, with installations declining rapidly

'.

13 llthereafter. Projections for

t~;fThe

charts indicated that if

"

15 1 products its entire installed base would be replaced by its competi~ors

~ail

In the face of these projections, the SPREAD Cowmittee stated the

17

Jneed for new products to be developed and delivered by 1965.

Accord-:j: ingly, they recommended announcement of the first processors in the

15

:i

19 :!line during the first quarter of 1964. (DX l404A, p. 57 (App. A to j

"'0 :, JX 38).)

'-

:,

21

The SPREAD Report, and the Systems Architecture Group which Z2ilwas responsible for implementing its recommendations, created a

'j

_ !.iproduct plan that went far beyond the recognized competitive need for

~ "

I

~;new and improved products and set forth a revolutionary concept of a

24 '!

I

-:tuture produc~ family. This concept represented a commitment to a

2.S

(18)

-277-L, far-reaching than any of IBM's competitors ever attempted. The

2: concept, subsequently embodied in IBM's System/360, held the potential,

s-

if successfully implemented, for enormous business success for IBM

4--1-

and also for- revolutionizing the EDP industry. I t sought not just

91

competitive success with e·xisting users but a vast expansion of the number and. types of EDP users and uses. At the same time, the magni-tude of the commitment--the devotion of virtually the entire business to that concept--carried with i t a risk of staggering proportions. Bot.~ internally and externally, the IBM System/360 program came to be

i

10;

referred to as a "you bet your company" undertaking. (Evans, Tr.

1::" ; 101126; see also Friedman, Tr. 50378; Case, Tr. 73561-62.)

The SPREAD Report and S/360. The concept for the New (NFL), which became 360, embodied a number of objec~ives

( i) the clear assertion of price/performance and technological leadership;

(ii.) the merger of business and scientific capabilities

in a single family of systems (in fact, the attainment of a series of computer systems that would be an industry leader in the performance of all applications, hence ~~e origin of ~~e name "System/360" to denote the full 360 degrees of the circle

(Evans, Tr. 101129));

(iii)

upward and downward compa~ibility across a broad

family of processors;

(iv) a comprehensive set of systems software;

(v) compatibility of a wide range of ?eripherals across

-278-i

(19)

;!

:1

;1

l i

z.:

_.1

,

~I

_,

f

5:

'.

it

ya

] il

S~

the entire family of CPUs; and

(vi) the substantial user flexibility attainable from the resulting modularity of the boxes constituting a 360 computer system. (DX l404A (APPr A to JX 38).)

Each of the objectives held the promise of greater customer acceptance and a substantial broadening of the demand for and use of computers, and each raised its own particular challenges and risks. The attainment of each objective posed obstacles in development,

~! design and manufacturing, each of which carried with i t the

possi-a

1

2!

i.

:3

It

.4- :

::i

...

;

a

:I

bility of failure. These objectives, and the manner in which IBM successfully attained them, are discussed in the following pages.

(i) Price/Performance and Tecr~ological Leadership--Generallv. The 8000 Series was cancelled because i t would not have been a "leadership" product for a significant period of time,

either technologically or in a price/performance sense. System/360, its replacement, was clearly intended to be both. In December 1962,

_I

I

d

_J

S!

T. V. Learson, IBM Vice-President and Group Executive of the Corporate

I

Staff, wrote to Evans that IBM's aim was to make the new line "eco-· I

il

9 ;i nomical as hell, siJnple to operate and the best on the market".

" _{, (DX} _4795.)

:0 :!

_.,

IBM's Chairman wrote in June 1963 that i t was important

'I

., ~l ;1

for IBM to "make these machines good enough so they will not be just

: ~

:/ equal to competition", because IBM expected that once they were

I., :;

~

:t announced IBM's competitors would "immediately try to better them" ~!

I

! and "I [Natson] 'Na!'lt cur neTN line to last long enough so we do not go

, A ~i

.~ :\

! in the red". (OX 4806.)

-279-I

I

[

i

I

(20)

3

I Tr. 12123-24; Welke, Tr. 17079-80, 17304-05; see also Northrop, Tr.

~i

82711; PX 3638.) In a memorandum written to Evans and Kennard just

I

~

It

all

II

7 ;1

;1

:1

8!

prior to the System/360 announca~ent, the Manager of Market Analysis for the Data Systems Division stated that "[i]t is difficult to

est~ate the competitive jolt NPL will create. Never before has a single announcement obsoleted so much existing equipment at one tL~e"

~ since "NPL will have an advantage over all existing systems offered la: by major competitors". (PX 1099A, p. 1.) In particular, the Model 3D,

!

11 ! intended largely to replace the 1401, had "six tL~es greater internal

12. I

speed" than that system. (DX 3726 (Tr. 78990); see also DX 4740: ij

13 11 Evans, Tr. (Telex) 4034-35; DX 4755.)

:{

14. :, The following comparisons at the time of announcement

il1us-15

:1

trate

II

'I

16 ;1

17 il

Rental

I,

'I

18 _'j

!

these L~provements:

Price (with maximum memory)

19 ;!Maximum Main Memory Capacity

,I

(Chars.) :r

20 I

"

! Performance

1401 $2,680

(OX 573, p. 6) 4,000

(OX 573, p. 3)

5,000

(DX 4740:

~lode1 30 $3,875

(JX 38, p. 33) 65,536

(JX 38, p. 32) 30,000

(DX 4740:

I

1

!

I

Z!! (instructions/ second)

:1

Z2 '~ Evans, Tr. Evans, Tr. :

(Telex) 4034-1 3 5; DX 4 7 55) 1 :1

~"" I!

~l I

~Performance/Rental Price

Z.i

25

-280-. (Telex) 4034-35; DX 4755)

(21)

I

il

:1 I 1; :

2:

Rental Price (with maximum memory) i

3";

_,

4.1,

Maximum main memory capacity

5i

j

I

0.:1

:1

- 'I

I fl

:1

8!

Rental per million characters

Performance (multiplications/second)

~f

I

10 ~

I

Performance/Rental Price

11 !

7090 $43,500

(OX 572A, p. 6)

19 6' , 6 0 8 (6. bit characters)

(OX 572A, p. 5)

$100,708

(OX 572A, p. 6) 38,200

(Case, Tr. 74220) .88

Model 75

$60,300

(JX 38, p. 394) 1,048,576 (8 bit

characters)

(JX 38, p. 394) $35,286

(JX 38, p. 394) 366,000

(Case, Tr. 74220) 6.07 Knap1und testified that just prior to announcement IBM

con-12!

:, sidered 360 price/performance to be superior to the best known 13

It

! competitive systa~s and substantially superior to the best of IBM's

14. t

; older computer systems. (Knaplund, Tr. 90503; see also PX l099A.)

15

! T. V. Learson wrote in July 1964 that System/360's price/performance

16

;!

1-:t

had achieved a 30% to 50% improvement over IBM's previous product

:./:: .

:.11 l~ne. (DX 1525.) Moreover, the analytical methods used at the time

18

:j to predict price/performance understated the comparative advantages

I

19 i

:\ of System/360 by failing to take into account the benefits to the user

20 '1

:1 stemming from the use of disks, the advantages of compatibility, the

I

_I

I

21 ,\

': System's

:1 Lrnproved reliability, the advantages expected to corne from itsl I

I

,flit? i~

~:i

software and the availability of large memories.

2.3;

105; see also PX 1099-A, p. 1; PX 6204, p. 1.)

(Knaplund, Tr.

90504-The price/performance and other advantages of System/360

25

(22)

-281-I.: were recognized outside of IBM as well. For example, plaintiff's

wit-!

2.'

ness Frederic G. Withington of Arthur D. Little reported in October

1 1964 that "[w]ith the introduction of their System 360 equipment, IBM

4-

established the new pri.ce-performance standard. for equipment within

~il

the computer industry for the next several years" (PX 4829, p. 16),

a

;1 an opini.on which he rei terated during his testimony. (Wi thington, ;1

7 i!Tr.

56591-92.) Withington also testified that System/360, at the

:1

8 :

time of its announcement in 1964, was "regarded as the best in terms ~ [ of incorporating the most recent developments in systems program and

la

i

machine architecture".. (Tr. 56590.) Similarly, in a June 1964

11

presentation to G. E.'s Executive Office, John Weil called System/~60

!2..1

an "excellent product line with outstanding peripheral offerings" and

13

:1

stated that it was "no longer possible to offer equipment with a

~+~t

significant advantage over IBM". (PX 320, pp. 13-14.) Additionally,

,

lS!

RCA's June 1964 "Five Year Plan" noted that System/360 "has and will

I

16 11 have a significa.1'1t impact on the marketplace and other suppliers are

17

:1

obliged to :neet its capabili ties" ·

(l?X 243, pp. 5 -6 · )

18

'I

(ii) System/360 Component Technology. In explaining his

!i

~I recommendation to cancel the 8000 Series, Evans had written: "New 19 :1

za

:!

technology is essential to a neT,., IBM machine family. Commi tting a

./

21 :1 new family's lot to current technology is opening IBH to a maj or

Z2 :!competitive coup". (DX 4773, p. 3.) The improvements in price/

:1

23 :! performance offered by 360 could not have been achieved without the I

24

,I

superior circuit technology that Eva~s had envisioned. (Case, Tr . . 1

~,., ~! _,;....

'

--I

:1

-282-'\ '\

(23)

L

i 73244; tvans, Tr. 101048.) Development of such technology (called

Z~ Solid Logic Technology or SLT) had already begun in IBM when the

I

.--. I

~! SPREAD Committee met. The Commi.ttee recommended the use of SLT as

4-1, processor componentry because i t "promised improved cost/performance

~!

and reliability." (JX 38, p. 5; DX 1404A, p. 7 (App. A to JX 38) .)

5 [I Case testified that "the entire System/360 line

7ilon the availabili.ty of the new SLT technology."

was predicated.

(Case, Tr~ 72303.)*

a:

SLT development, which had begun prior to 1961, was

acceler-i

9 ; ated in April of tha.t year- on the recommendation of IBM's Advanced i

10 t Technology Study Committee that a "high priority SLT program" be

!

11!

established. (JX 38,

p.

5.) According to Erich Bloch, who headed

~i

the Advanced Technology Study Committee until September 1964, that

:/

"

I

W ~ Committee had been charged with recommending the logic component 1~!1 technology that I~M should use in its future EDP equipment and with

1:;1

establishing the schedule and cost objectives for its implementation. 16 ;: (E. Bloch, Tr. 91468-69, 91492, 91686; see also DX 9117, p. 2.)

~-

:1;

~I i The Committee decided that the new technology had to be

is

:!producible at half the cost of the then current SMS (Standard Modular

:i

19

:!

System) technology and be four times as fast.

20

i!

93. )

(E. Bloch, Tr.

91492-These performance goals were influenced by both the technology

:!

21

:1 performance and computer performance that could be achieved by IBM

,! ·1

Z2:;competitors, including both computer manufacturers and component

1,

I

~i---2A

j

*

"In fact, in its early states, the System/360 project was known

~l as the SLT family." (Case~ Tr. 72303.)

~_/_=

I

:1

(24)

1

i

manufacturers. According to Bloch, the existence of such competitors

i

I

2,;

and their introduction of new products and processes since the 1960s

l ! has forced IBM to be alert to their offerings in order to remain i _i

~I competitive in terms of cost, performance, reliability and function.

5 j. (Tr. 91690-92.)

*

As T. V. Learson later put it, prior to the

intro-I

I

6 :

duction of System/360, "IBM had been in the market for a long time

if

7

\1 with the old circuitry . • It was time for a change. Competitive

:1

8 i action told us so . . . . If (PX 1900, p. 7.) Because of such

9

"competitive pressures", the Committee decided that the development

1a

of the new technology had to be accomplished within 18 months and the

11 delivery of machines incorporating the technology to customers begun

12

! wi thin three years. (E. Bloch, Tr. 91686-87; see also OX 9117, p.

"

13

!13.)

l~ ; _I The Co~~ittee considered three courses of action:

improve-1:

ment of the existing technology; development of monolithic tecb~ology;

!

15

i!

and further development of a hybrid technology (SLT) with discrete

17 it

sa~iconductor

components combined with screened circuit elements.

- t\

I

18

:I

(E. Bloch, Tr. 91492.)

- il

SMS was the packaging for discrete components (Case, Tr. 72265.)

19 :1 used by IBM in its second generation equipment.

• :1

20 J It had been designed and developed by IBM for Project STRETCH and was

.,

21 :\

superior to the discrete component packaging available from outside

22

~t

suppliers because i t was

opti..~ized

for use in EDP equipment. (E. Bloch;

~

:1---

_I

!

*

Bloch included such fi~s as Texas Instruments, Fairchild,

24. "

_I

Motorola, Intel, Mostek, ~~D, Hitachi, Fujitsu, Philips and National

25

:I

Semiconductor. (E. Bloch, Tr. 91691-92.)

1

"

I

(25)

-284-1.; Tr. 91486-87 .) Despite its contribution to IBM's successful line of I

~!

second-generation computers, the Committee concluded that SMS

tech-3: nology had apparently been pushed close to its limits in terms of

4- cost, performance and reliability and would not yield the desired

5'

I

performance improvements. (E. Bloch, Tr. 91493; see DX 9117, pp.

4-I

i

6:

5,8.)

:1

7

il

In order to gain additional information about the

feasi-8 ; bility of going directly to monolithic circuitry,

*

IBM was advised by

!

~! other companies, including Fairchild, Texas Instruments and Motorola,

10 concerning their development activity with monolithic technologies.

11 (E. Bloch, Tr. 91694--95.) The Committee concluded that while

rnono-i

12 ! lithics could meet the performance requirements laid down they could

I

~. not be produced in the time or at the cost desired. (E. Bloch, Tr.

l~. 91492-94; see also Gibson, Tr. 22625-27; DX 4782.) The Committee I

15 : therefore recommended moving part, but not all of the way to

mono-I

16 fllithics: the continued development of the "hybrid (SLT)

configura-1

7 li

tion" . (E • Bloch

~

Tr. 9149 2 -9 4 . )

• ,I

18 :I That

reco~~endation

was based on several advantages to the

:i

:ISLT technology: first, it would lend itself well to automation and to

19 I

za

:i

a fast production buildup; second, i t would lend itself "to a product

:1

21 :1 spectrum of applications" in processors of all sizes as well as

Z2 'tinput/output devices; third, it would be capable of providing the

23 :1

~

·.· .•.

'----*--'-'-[T--]-h-e---24: total integration of all devices . . . and interconnecting

:;wiring in a single piece of semiconductor material". (E. Bloch, ,~·[Tr. 91492.)

-- iI

" I

I

!

"

'f _'1

'\

i ·1

-285-I

I

!

i

.j

I

(26)

L\

necessary speeds or performance ranges; and finally, the semiconductor

Z:r

packaging

wou~d

accommodate the semiconductor

we~~,

provide t..'le needed

... l

~ .. : electrical characteristics and give the desired packaging densities.

4-i·

(E .. Bloch, Tr. 91699-701.)

,

:; it

These anticipa.ted advantages were in fact

rea~ized

and SLT

!;,

became a high-performance technology for its day, offering a

sub-:!

7:1

stantia~ increase in speed at a substantia~ reduction in size.

s;

(Case, Tr. 72301-03; E. Bloch, Tr. 91705; see also PX 3587 (Tr.

9- i 25334).) SLT was a "significant advance" in IBM computer technology:

10: i t required less space, power and cooling per circuit than SMS; i t had

11! higher performance and "ten times the reliability" of the earlier

~i technology--all at a reduced cost. (E. Bloch, Tr. 91496-97; see also

!3

~f

tl

:..;. i

_~

IS

\1

16

;i

17

.f

_,I I

lS .1

,i

'\

19 ·i 'r

]

zcr:

_,I

:1

Zl

:!

}

~_ ,r

/ , . I

- j

,._ 'I

~ \

~

I

.,...!

_{_- I}

\

2.': ;

i

McCarter, Tr. 88380; Evans, Tr. 101132.) Thus,. SLT enabled IBM to offer "very substantial gains" in price/performance. (Evans, Tr. 101132.) Further, SLT "lent itself to automation" (E. Bloch, Tr.

91705) and IBM took advantage of that fact by investing heavily in the development of automatic tools. (Case, Tr. 72298-301.) "IBM

coordinated the development of tools, the development of a design automation system and the production and testing of components ~vith the development of the components themselves. Each of the parts of the technology took into account the other parts." (E. Bloch, Tr. 91497-98.)

Such automation enabled IBM to reduce 'production costs and improve the reliability of its circuits. (Case, Tr. 72301; E. Bloch, Tr. 91497.) IBM's "substantial investment~ in automatic manufacturing \ techniques was a very irnpor~ant factor in allowing IBM to make System/

'\

\

·1

I

f

'f

.,

j

,I

'!

.. ;

(27)

-286-I

J'

.

:

-

.

360 much more powerful for the same price or to be a lot less costly for the same power. (Case, Tr. 72301.) From 1965 to 1969 SLT tech-nology and the automation which accompanied i t gave IBM a cost advan-tage over other component manufacturers who moved their assembly outside the United States in order to get a cheaper labor source for the relatively labor-intensive production processes. (E. Bloch, Tr. 91708.) No other computer manufacturer had the equivalent of SLT technology at the time of System/360's announcement and. delivery

(Evans, Tr. 101131), despite the substantial benefits that i t held and despite the fact that SLT was an extension of the existing tran-sistor technology which was readily available to everyone.

Only with the benefit of hindsight, however, was i t obvious that the SLT decision was the correct one. During the middle 1960s, up to about the beginning of 1966, criticism of the decision was : : expressed within IBM. Critics thought that SLT had been the wrong

I

6 ~t choice, that by being more aggressive IBM could have gone to

mono-I

I

!

i

- J

_j _:

'!

lithic circuits a'nd taken a larger jump forward.

*

(E. Bloch, Tr.

. I

S :i

:i

S i ,!

'!

( " f l

, .. ·i

I

!'T i

- I _i

91695-96.) Implicit in ~~at criticism was the apprehension that IBM would be the victim of a competitive coup by other companies moving beyond IBM in circuit development.

This failed to happen. Based upon a comparison of the cost and capabilities of IBM's SLT circuits with competitive monolithic

2'i t

'~

i

~I

I

',4 .1 ~- }

circuits that became available from the mid-1960s for;vard, Bloch

*

Bloch also testified tl1at the criticism "died dort/n" r.vhen i t became

~S clear that "SLT met all the goals" set for i t in a ~Nay tl1at could not have been done with monolitl1ics. (Tr. 91696.)

(28)

i

1 i concluded that SLT had as good a performance as those later developed

~

Z

i products, was "much denser" and was produced at lower cost than the

1

l;

products which IBM's competitors acquired from outside vendors.

t i

~I (E. Bloch, Tr. 91704-05; see also Withington, Tr. 56591.) Moreover,

:1

_,

when IBM did convert to monolithic circuits in 1968-1970, i t was able

I

5 ; to use a great deal of what had been done in SLT to ease the

transi-If

7;f

tion into monolithics. (E. Bloch, Tr. 91698; Dunlop, Tr. 93991.)

~I

8 ;, This planning for the future had been taken into account by the

9 : Advanced Technology Committee and for that reason IBM designed

tech-I

10 I

niques and tools during the SLT development that could be adapted to

I

II ! the manufacture of monolithic circuitry. (See E. Bloch, Tr. 91500,

12

r 91703, 91494 and Case, Tr. 72300-14 for details of the carryover of

13 il

SLT development into mono1ithics.) SLT still is being used by IBM in

l~!l

secondary circuit functions of newer products. (E. Bloch, Tr. 91499.)

15 II

The advantages of automation, of taking an intermediate step

- 15 if toward monolithics, and of coordinating circuitry, component and

17

:1

product development could be fully realized only through in-house

18 :!development and manufacture. Accordingly, the Advanced Technology

19

:1

Study Committee recommended the establishment of a components division

;fWhiCh would be able to manufacture SLT on a large scale. (E. Bloch,

20 ;1

,I

?'T ;! Tr. 91562.)

--:! .

,I Case called IBM's decision to develop and build its own new

22 ';

-~ i . . t

..,~ :1 c~rcu~try "perhaps the riskiest single decision that had to be made by

~ ;1

;; IBM in the development of System/360". (Tr. 73514.) It required a 24 I

:!

substantial capital investment in a new business--developing and

manu-25 I

: facturing transistor components--in which IBM had had little prior

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if,

d

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:t

q

(29)

-288-.1

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L· experience. Not surprisingly, there was considerable debate within

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2: IBM whether components was an "appropriate business" for IBM to get i

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into, and the decision to establish the Components Division in 1961

!

~l continued to be second-gues~ed well into the 1960s--1ong after IBM

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had committed itself to the point whe.p. there was no turning back. (Case, Tr. 73515.) In short, as T. V. Learson put i t in 1966: IBM "had to become, in a very short time, the largest component manufac-turer in the world".

(PX

1900,

p. 9.)

If

IBM were successful, the potential benefits overrode those risks:

(a) in-house manufacture could help IBM reduce its total costs by eliminating middle-man profits;

(b) by designing the new circuitry and the new machines sL~ultaneously, IBM could get the best new circuitry earliest because IBM would not have to wait for another firm to finish its circuit development process and make the circuit available in order to explore the circuit's potential characteristics and use in a computer system;

(c) unlike other manufacturers who were less integrated and who would have to adapt generalized circuitry to their particular needs, IBM would be able to enhance the price/performance of its computer systems by tailoring its own circuitry to the require-ments of System/360. (Case, Tr. 73245-48; see also E. Bloch, Tr. 91563.)

In-house manufacture would also permit IBM to accelerate the training of computer engineers in both t~e characteristics and use of the new

I

circuit technology. According to Case, i t was believed t~at IBM "couldl

I

,