In its new alliance with MCI Communications Corp., International Business Machines Corp. has managed to achieve what it failed to do with its Satellite Business Systems subsidiary -- become a major player in the multibillion-dollar long-distance telecommunications market.
Through MCI, IBM would be able to compete against American Telephone & Telegraph Co. in virtually every segment of the information and voice communications industries if the deal receives regulators' approval and is completed. The move unquestionably will greatly increase pressures on such telecommunications companies as GTE/Sprint, Allnet and other long-distance and telecommunications companies to seek financially well-heeled partners.
It also may pressure the Federal Communications Commission to lift special joint marketing restrictions that currently limit AT&T's ability to provide computer hardware, software and services to its customers through the same subsidiary.
"I hope this provides ample evidence to the regulators that the time has come to remove the constraints from AT&T, so we all can compete fairly and evenly," said Randall A. Tobias, president of AT&T Communications, the company's long-distance arm.
"If IBM wants to introduce a new service it announces it. We have to file papers with the FCC and it gets all hung up in regulation," he said.
IBM's move, which was unexpected, simultanously rids IBM of its money-losing SBS while giving it access to MCI's superior consumer marketing abilities and extensive satellite and fiber optic national telecommunications network.
IBM now will have the means to create national and international data networks, while MCI will be able to expand extensively its customer base to include large business customers that may want to create their own networks to cut costs. What's more, IBM now is positioned to enter voice services, while MCI can offer IBM customers a more extensive telecommunications network over which data can travel.
"It creates a very strong competitive force against AT&T," said an SBS manager who once worked for MCI.
"I think it's a brilliant move," said Robert E. LaBlanc, a telecommunications consultant. "IBM really didn't have a networking capability, and now, lo and behold, they seem to be taking the final step."
At the same time, LaBlanc said, "It gives MCI a business respectability which they have not had up to now -- who gives you more respectability than IBM? It's now a safe decision for a corporate telecommunications manager to buy MCI."
The new alliance between the world's largest computer company and the nation's second-largest long-distance telecommunications provider is a powerful demonstration of the inexorable merger of the data processing and the telecommunications industries.
IBM, even though it is the world's largest computer company, has long recognized that it is not just in the business of selling computers -- but rather of processing information in all of its forms. Consequently, the company has sought to diversify into the various realms of information transmission, collection, manipulation and distribution.
"There is a chain reaction of companies clustering around IBM and AT&T in the United States and internationally," said Brian Jeffery of International Technology Group, a Palo Alto, Calif., research firm. Many of IBM's rivals are moving toward AT&T, while AT&T's are headed toward a relationship with IBM, he said.
AT&T has joined with Olivetti, a major Italian-based computer manufacturer, and, according to Jeffery, has discussed possible relationships with Wang Laboratories Inc. and other U.S. computer firms.
IBM last year purchased Rolm Corp., which ranks a distant second behind AT&T as a producer of telecommunications terminals and is acquiring cellular radios from Motorola Inc. In Japan, IBM has linked up with Mitsubishi and AT&T with Sony, Jeffery said.
"It gives IBM the whole ball of wax," said John S. Bain, an analyst with Shearson Lehman Bros. In addition to its computer line and telecommunications switching equipment from Rolm, IBM now has transmission with a strong tie to the No. 2 long-distance carrier, MCI, he said.
The alliance is intended to give the two companies both a marketing and a technological edge in the race to fulfill the information processing needs of Fortune 1000 companies. With the exception of AT&T, there are no other companies or corporate partnerships that blend voice and data communications networks with advanced computer and communications equipment.
IBM and MCI now would be able to go into any Fortune 1000 company and offer a service for practically every computer, data and voice communications needs. The two companies could offer everything from personal computers to the phone lines that allow electronic messages to other personal computers.
Many industry analysts and participants now assert that telecommunications and computer companies have little choice but to combine in order to compete.
"All the big resellers have been looking for mergers and it will put pressure on them and other competitors to consolidate quickly," said one FCC source who asked not to be identified. "My assumption is this is going to help competition . . . ."