Ibm & Siemens over ROLM telecom

8/11/2019 Ibm & Siemens over ROLM telecom

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Presented

Laveena B

Prasoon Aga

Aparajita Das G

IBM and Siemens


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Introduction

The case takes us through the following things Details about PBX (Private branch exchange

Evolution of PBX

Foundation of ROLM and its success

IBM and ROLM

Problems at IBM ROLM

Challenges before Siemens


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Private Branch Exchange(PBX)

PBX is a switch that distributes and routes voicmessages throughout an organization and betw

organization and the public telecommunication

Customers were private enterprises.

The technological and scale barriers to entry wminimal.

In mid 1980s, 130 different companies manuf

PBX equipment in the United States.


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By 1990s, the capabilities of PBX grewand it became hub of communication

system accommodating data transmission

well as voice communication.

Product price, quality, service, andreliability were key purchase areas


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Rolm

Rolm was founded in 1969 by four Rice Unive

classmates in which Ken Oshman was the pres

Their first product line was minicomputers des

meet rigorous military requirements.

Rolm diversified into PBX in 1975 when telep

was still analog.

Rolms highly successful CBX (computerized

exchange was more flexible and versatile than

anything else at that time.


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By 1982, Rolm was number three in PBX marwith 15% market share after AT&T and north

telecom.

Rolm had informal, creative and unconvention

environment and saw market opportunities befother companies could see them.

In 1983, Rolm was included in Fortune 500 an

1984, its sales reached $659.7 million.


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IBM-ROLM

In order to forge close ties with major PBX pl

IBM purchased 15% of Rolms stock for $229million.

In September 1984, IBM purchased rest of the

of Rolm for $70 per share. Overall $1.49 were

invested for 100% acquisition. The Rolm purchase had put IBM in the numb

position in PBX industry.

IBM was also able to maintain 16% annual gr

rate in market.


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In june 1987, IBM terminated Rolmssubsidiastatus.

In addition to difficulty of integrating a compan

with a very different culture, IBM executives w

struggling to manage thin margin operations incompetitive and saturated market.


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Recommendations

ROLM being first mover should plan for fut

investing in research over LAN solutions mo

As IBM being one of the leaders of technolo

should also focus on drastically improving th

efficiency of Rolm by giving it technologica

over competitors ROLM should have focused on global mark

Increase its add campaigns focusing on bette

technology and service aspects


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Contd..

ROLM management need to interact with its

customers to know about their opinions for tservices

Best strategy for ROLM at that time was to k

their margins at industrial standards and reta

customers for long run It should have merged with IBM so as to get

organisational capabilities like sales force

HR people should have keep a track of smal

problems and avoided conflicts


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Pros & Cons of Recommendations

Pros

ROLM telecom would have survived if it had n

into conflicting situation and focused on long te

aspects by surviving through doing things as

recommended

ConsAs IBM was incurring losses may be ROLM ne

instant profits which could not be obtained by

recommendations given ,as it had survived 6 ye

by making big revenues.


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CASE QUESTIONS

Q1 Should IBM sell the Rolm division to Siemen

should the two companies consider alternativessale?

IBM clearly wasn't able to make the best of ROleading to a frustrating experience for both.

Siemens a already a market leader in PBX, will

able to help in bringing innovation/ new technothe PBX equipment in Rolm and hence revive R

With IBMs great image & presence in US andcountries, this sale can be of great advantage to


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Contd..

If IBM sells ROLM division

IBM losses a entire segment of communication sehence losing a whole line of services

IBM could raise sufficient revenues to come out

existing losses and so beneficial for whole compa

If IBM does not sell ROLM division

ROLM division could take large amount of capita

resources of IBM causing great issues for IBM co

segment

IBM has opportunity to enter deeper into tele

communication services hence increasing revenu


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Contd..

Alternatives

IBM could shrink the size of ROLM division fo

term and focus on researching new trends in tele

communication services and come back with str

new services

Form a joint venture between Siemens & ROLMdivision

Merge ROLM division in IBM so as to use com

resources of both companies for mutual benefit


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Q2.As a Siemens executive, what would be some of the crit

regarding Siemens involvement with Rolm that you would

concerned about?

Cultural: Integrating two organisation with diffcultures and way of working.

Transfer of Business risk: Much of IBM s bus

risk will be transferred to Siemens.

Retention of employees: May face problem inretaining employees.

Transfer of financial cost: IBMs financial cost

relating to Rolm will be transferred as well


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Contd..

Affect the users: May affect the users of the prowho had great investment in Rolm equipment.

As to how to structure Siemens participation in

ROLM division so as to ensure Rolmswell be

while simultaneously assuring good return.


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Q3.What is the uncertainty around Rolm

Inability to predict the PBX market.

Price wars resulting in decreased sales growth

Led to ROLM incurring hundred of million loss

Internal conflict with IBM plus great struggle to

maintain thin margin

Led to uncertainty as to how to cure ailing

ROLM.

Conflicts going on in organisation due to

increased pressure


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Contd..

Less margins as compared to previous years Customer retention

Competition from large telecom players

Market potential for PBX market


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Conclusion / External Research

ROLM split into Rolm Mil-Spec Computers an

Telecom. During 1983-1984, IBM partnered wcompany, and Rolm Mil-Spec was sold to

Corporation and later to Lockheed Martin in 1996 as

Defense Systems. IBM's ROLM division was later

to Siemens AG in 1989, whereupon the manufactu

development became wholly owned by Siemens anROLM Systems, while marketing and service becam

venture of IBM with Siemens, called ROLM C

After nearly 30 years, phone products with the name

were discontinued in the late 1990s


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Thank You

Ibm & Siemens over ROLM telecom

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