In the end, IBM landed Lotus Development Corp. by offering a little more money and a surprising measure of independence to the Lotus management team. Is the cost too high on both counts?
International Business Machines Corp.'s promise of freedom to the Lotus management is regarded as a deft early move by IBM's chairman, Louis V. Gerstner Jr., to reassure the Lotus staff, keeping the company's intellectual assets intact.
Both companies also took pains yesterday to assure nervous Lotus employees that their jobs would be safe after the merger.
But industry executives and analysts also view the IBM pledge that Lotus' managers, software developers and marketers will remain independent could well set the stage for future internal strife as IBM struggles to make its $3.5 billion investment pay off.
These conflicts, they say, are inevitable as IBM seeks to make the most of Lotus Notes, the leader in a software category called groupware, which enables people to work in computer-linked teams.
The reason IBM paid so much for Lotus was to get Notes, both to hold on to its corporate customers and challenge Microsoft.
"The long-run strategy for IBM has to be to integrate Notes into its various businesses," said David Yoffie, a professor at the Harvard Business School. "If you have separate sales forces and software development teams," each with its own agenda, "there is simply no way IBM can get the benefits it needs to make this deal pay off."
After a week of negotiations, IBM's decision over the weekend to sweeten its offer by $4 a share, was a routine move in the etiquette of takeovers.
But IBM's promise to Jim P. Manzi, the 43-year-old chief executive of Lotus, that he could stay on and run his old domain as an independent business, is unusual. Mr. Manzi is also to become an IBM senior vice president and report to Mr. Gerstner.
Few analysts believe that arrangement will be maintained for long. "Even if you have a separate structure called Lotus, we think that independence will be much more window dressing than a reality," said Scott Winkler, a research director for the Gartner Group in Stamford, Conn. "And you can be sure that there will be fights within IBM about the direction of Lotus."
Typical of the kind of conflict expected will be whether Lotus develops a version of Notes to run on IBM mainframes and minicomputers. IBM has long been prodding Lotus, Mr. Winkler says, to fashion Notes offerings for those machines.
Until now, Lotus has resisted. "But now that IBM owns them, the Lotus executives are going to have a pretty difficult time telling IBM that your mainframes and minicomputers are not worthy of our software," Mr. Winkler said.