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Lotus Employees Warm Up To Ibm Deal Ibm Chief Promises Job Security, But Restructuring To Continue

Tue., June 13, 1995, midnight

The top executives of IBM and Lotus Development Corp. assured nervous Lotus employees Monday their jobs would be safe after it becomes part of IBM.

But they also said Lotus will press on with an internal restructuring and, eventually, IBM will likely apply the same cost scrutiny to the new unit that it has to all its operations in recent years.

Employees were upbeat about the takeover, however, which was a good sign for IBM because employees, particularly programmers, are the most important asset of a software firm.

“We don’t care who pays our salary,” one Lotus programmer said, asking that his name not be used. “We just want more people using our software.”

IBM launched a hostile buyout of Lotus last week and then negotiated slightly better terms that resulted in a friendly deal announced Sunday for $3.52 billion, or $64 a share, the largest acquisition in the software industry.

After rising slightly, Lotus stock finished unchanged at $62.87 1/2 on the Nasdaq Stock Market Monday. IBM closed up $1 to $90.12 1/2 on the New York Stock Exchange.

“The real target here is customers, customers who have discovered that the real promise of client-server computing has not been delivered by this industry,” IBM chief executive Louis Gerstner Jr. told reporters after the employee meeting.

The term “client-server” describes a design of networked computer systems, increasingly common in businesses, in which data is shared between large and small computers instead of being centralized on large machines, which was typical since the mid-1960s.

IBM’s chief interest in Lotus was its product called Lotus Notes, a communications, database and archiving program that can be customized by a company and works on a variety of computers and operating software. The program is part of an emerging product niche called “groupware” that has helped some companies transform their internal operations.

Lotus Notes and cc:Mail, an electronic mail application, have been rising as a proportion of Lotus revenue, while its word processing and spreadsheet applications are declining.

Those desktop products fell from $765 million in revenue in 1992 to $622 million in 1994, while revenue from Notes and cc:Mail rose from $104 million to $349 million during that period, according to Lotus.

The change contributed to a $17.5 million first-quarter loss for Lotus, which prompted the company to begin restructuring last month into four business units. Senior managers and directors also took a pay cut.

Officials said Monday that the restructuring was to continue.

“We have been a company that recently has been struggling to find enough resources to invest in our vision for team computing,” said Lotus chief executive Jim Manzi. “Lou has assured me we’re going to have all the resources we need. That is the single big opportunity that I tried to convey to employees.”

Manzi, only the second CEO in Lotus’ 13-year history, will remain in charge of Lotus after the takeover and become a senior vice president of IBM. That surprised some observers but will likely help assure a smooth transition.

“I think if Manzi left, a lot of people would be right behind him,” said another Lotus employee.

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