Read the passage carefully and choose the best answer for each question.
How quickly things change in the technology business! A decade ago, IBM was the awesome and undisputed king of the computer trade, universally feared and respected. A decade ago, two little companies called Intel and Microsoft were mere blips on the radar screen of the industry, upstart start-ups that had signed on to make the chips and software for IBM’s new line of personal computers. Though their products soon became industry standards, the two companies remained protected children of the market leader.
What happened since is a startling reversal of fortune. IBM is being ravaged by the worst crisis in the company’s 79 year history. It is undergoing its fifth restructuring in the past seven years as well as seemingly endless rounds of job cuts and firings that have eliminated 100,000 jobs since 1985. Last week IBM announced to its shell-shocked investors that it lost \$4.97 billion last year – the biggest loss in American corporate history.
And just when IBM is losing ground in one market after another, Intel and Microsoft have emerged as the computer industry’s most fearsome pair of competitors. The numbers on Wall Street tell a stunning story. Ten years ago, the market value of the stock of Intel and Microsoft combined amounted to about a tenth of IBM’s. Last week, with IBM’s stock at an 11-year low, Microsoft’s value surpassed its old mentor’s for the first time ever (\$26.76 billion to \$26.48 billion) and Intel (\$24.3 billion) is not far behind. While IBM is posting losses, Intel’s profits jumped 30% and Microsoft’s rose 44%.
Both Intel, the world’s largest supplier of computer chips, and Microsoft, the world’s largest supplier of computer software, have assumed the role long played by Big Blue as the industry’s pacesetter. What is taking place is a generational shift unprecedented in the information age – one recalls a transition in the US auto industry 70 years ago, when Alfred Sloan’s upstart General Motors surpassed Ford Motor as America’s No. 1 car maker. The transition also reflects the decline of computer manufacturers such as IBM, Wang, and Unisys and the rise of companies like Microsoft, Intel, and AT\&T that create the chips and software to make the computers work. “Just like Dr. Frankenstein, IBM created these two monster competitors,” says Richard Shaffer, publisher of the Computer Letter. “Now even IBM is in danger of being trampled by the creations it unleashed.”
Although Intel and Microsoft still have close relationships with Big Blue, there is little love lost between IBM and its potent progeny. IBM had an ugly falling-out with former partner Microsoft over the future of personal computer software. Microsoft developed the now famous disk operating system for IBM-PC – called DOS – and later created the operating software for the next generation of IBM personal computers, the Personal System/2. When PS/2 and its operating system, OS/2, failed to catch on, a feud erupted over how the two companies would upgrade the system. Although they publicly patched things up, the partnership was tattered. IBM developed its own version of OS/2, which has so far failed to capture the industry’s imagination. Microsoft’s competing version, dubbed New Technology, or NT, will debut in a few months and will incorporate Microsoft’s highly successful Windows program, which lets users juggle several programs at once. Windows NT, however, will offer more new features, such as the ability to link many computers together in a network and to safeguard them against unauthorized use.
IBM and Intel have also been parting company. After relying almost exclusively on the Santa Clara, California company for the silicon chips that serve as computer brains, IBM has moved to reduce its dependence on Intel by turning to competing vendors. In Europe, IBM last year began selling a low-cost line of PCs called Ambra, which runs on chips made by Intel rival Advanced Micro Devices. IBM also demonstrated a sample PC using a chip made by another Intel enemy, Cyrix. And that October IBM said it would begin selling the company’s own chips to outsiders in direct competition with Intel.
IBM clearly feels threatened. And the wounded giant still poses the biggest threat to any further dominance by Intel and Microsoft. Last year, it teamed up with both companies' most bitter rivals – Apple Computers and Motorola – to develop advanced software and microprocessors for a new generation of desktop computers. In selecting Apple and Motorola, IBM bypassed its longtime partners. Just as Microsoft’s standard operating system runs only on computers built around Intel’s computer chips, Apple’s software runs only on Motorola’s chips. Although IBM has pledged that the new system will eventually run on a variety of machines, it will initially run only computer programs written for Apple’s Macintosh or IBM’s OS/2. Its competitive juice now flowing, IBM last week announced that it and Apple Computer will deliver the operating system in 1994 – a year ahead of schedule.
As a result of greater competition in the US Computer industry
Show Hint
- some computer companies are expanding while others are contracting.
- employment in the industry is going down.
- the industry is becoming more monopolized.
- the share value of IBM is going up relative to that of Intel and Microsoft.
The Correct Option is A
Solution and Explanation
Which of the following statements is not implied by the passage?
Show Hint
- The market of microchips and software’s are becoming leaders in the computer industry.
- Wang and Unisys are primarily manufacturers of computers.
- IBM laying off workers in the biggest job cut in American corporate history.
- Intel is based in California.
The Correct Option is C
Solution and Explanation
The personal computer called Ambra is marketed by:
Show Hint
- Cyrix.
- IBM.
- Intel.
- Microsoft.
The Correct Option is B
Solution and Explanation
Why is something that happened 70 years ago in the US auto industry being mentioned here?
Show Hint
- General Motors broke away from Ford Motors.
- A new company went ahead of an established market leader.
- Like Dr. Frankenstein, Ford Motor created a monster in General Motors.
- Microsoft, Intel and AT \& T were originally created by IBM.
The Correct Option is B
Solution and Explanation
Who is mentioned as the principal supplier of silicon chips to IBM?
Show Hint
- AT\&T.
- Microsoft.
- Cyrix.
- Intel.
The Correct Option is D
Solution and Explanation
One possible conclusion from the passage is that
Show Hint
- share prices are not a good indicator of a company’s performance.
- firing workers restores a company’s health.
- all companies ultimately regret being a Dr. Frankenstein to some other company.
- consumers gain as a result of competition among producers.
The Correct Option is D
Solution and Explanation
Which of the following statements is true?
Show Hint
- IBM plans to introduce a new system that will run on a variety of machines.
- IBM’s new generation desk top computers will run only on Motorola’s chips.
- IBM is working out a joint strategy with Apple to force Motorola to supply chips at a lower price.
- IBM is going to sell its own chips to Apple and Motorola.
The Correct Option is A
Solution and Explanation
Many computers will be linked together through a network in a system developed by
Show Hint
- IBM.
- Apple.
- Microsoft.
- None of the above.
The Correct Option is C
Solution and Explanation
What was the original reason for the feud between IBM and Microsoft?
Show Hint
- The two companies developed competing software’s.
- Microsoft and Intel teamed up against IBM.
- IBM began to purchase microchips from Intel instead of Microsoft.
- IBM made loses while Microsoft made profits.
The Correct Option is A
Solution and Explanation
Which of the following statements is true?
Show Hint
- IBM plans to introduce a new system that will run on a variety of machines.
- IBM’s new generation desk top computers will run only on Motorola’s chips.
- IBM is working out a joint strategy with Apple to force Motorola to supply chips at a lower price.
- IBM is going to sell its own chips to Apple and Motorola.
The Correct Option is A
Solution and Explanation
Option (b) is inaccurate because IBM would not restrict its new systems to a single chip manufacturer, especially given the context of competition and flexibility.
Option (c) refers to a joint strategy but lacks direct support from the passage.
Option (d) is speculative — the passage never states IBM intends to sell chips to others.
Many computers will be linked together through a network in a system developed by
Show Hint
- IBM.
- Apple.
- Microsoft.
- None of the above.
The Correct Option is C
Solution and Explanation
IBM, though a major player in hardware, was not the company developing this network system as per the passage. Apple is not even mentioned in that context, and hence is irrelevant here.
Thus, Microsoft is the correct choice based on direct evidence from the text.
What was the original reason for the feud between IBM and Microsoft?
Show Hint
- The two companies developed competing software’s.
- Microsoft and Intel teamed up against IBM.
- IBM began to purchase microchips from Intel instead of Microsoft.
- IBM made losses while Microsoft made profits.
The Correct Option is A
Solution and Explanation
Option (b) is misleading — while alliances matter, the main issue was competitive software.
Option (c) mixes up hardware-supplier relations and is not related to the feud.
Option (d) states a consequence (profit difference), not the cause.
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