FAWN ALVAREZ FAWN ALVAREZ
In 1982, ROLM introduced a breakthrough innovation: voice mail. For the first time, callers could leave extended recorded messages. Voice mail helped send the sales of ROLM’s CBX phone system skyrocketing. Fawn Alvarez and other employees at companies that installed voice mail now needed to learn how to use it. The earliest messages were variations of “It’s me. Call me back.” It took a while for people to understand that they could leave the important part of the message in the recording, with no return call necessary.
Alvarez’s work in the forecasting group had grown even more interesting over the past two years. Her boss, Dave Ring, who would later serve as the vice president of manufacturing at Cisco Systems, was overhauling the forecasting process. He wanted the cooperation of people from finance and product management, as well as sales, marketing, and manufacturing. He relied on Alvarez, with her long history at ROLM and contacts in multiple divisions, to help identify and interest the people with leverage or influence throughout the company.1
Ring had graduated from Harvard and Stanford. Soon a manufacturing expert would join the forecasting group; her graduate degree was from Yale. Everyone had at least a bachelor’s degree, except Alvarez. “I think Fawn felt some risk around her lack of degree,” says Ann Magney Kieffaber, the Yale School of Management graduate who joined the group and the only other woman. “She shouldn’t have. Her confidence and her contacts at the firm were truly hard to beat. She was very sharp, and she knew all the players and what their objectives were.”2
Alvarez says, “Even though I maybe exuded confidence, it was always in my mind that maybe I was—I don’t want to say a fraud, but maybe I wasn’t as smart as I thought I was. Maybe I was just a butthead with a big mouth. I’d see these people with all their degrees, and I’d think, ‘If I’m going to bring something up, I’d better know what I’m talking about.’ I was afraid I would say or do something stupid.”3
In 1983, around the same time that the video game industry crashed, IBM bought a 23 percent stake in ROLM as a defensive move. The previous year, the Department of Justice had forced AT&T to divest itself of the Regional Bell Operating Companies that provided local and long-distance telephone service. Many people believed that with the loss of the operating companies, AT&T would enter the commercial computer market.II IBM reasoned that if the country’s largest telecommunications provider was going to start selling computers, the largest computer manufacturer needed to be in the telecommunications business. ROLM provided a way in.
In October 1984, IBM announced that it was fully acquiring ROLM for $1.8 billion ($4.3 billion in 2016 dollars). It was Big Blue’s first acquisition in twenty-two years and the largest in its history.4 “Every one of us remembers the day we heard about the sale,” recalls Ron Raffensperger, a high-level engineer at ROLM who joined in 1976. “It’s, like, ‘Where were you the day Kennedy died?’ ”5
For weeks, Alvarez had heard rumors that “something big” was going to happen, but the acquisition nonetheless shocked her. ROLM had recently joined the Fortune 500. The company had $37 million in profits on nearly $660 million in sales.6 “No one thought the founders would sell,” Alvarez recalls. She had not known that although ROLM’s sales had continued to climb, its profit margins were shrinking. The founders, somewhat to their own surprise, had decided that a sale was inevitable, and the sooner the better for ROLM shareholders.
On paper, ROLM and IBM seemed a fine match. Nearly all of the top one hundred companies on the Fortune index owned computers (either large machines or the year-old IBM PC) from IBM and phone systems from ROLM, which had 15 percent of the switchboard market, second only to AT&T.7 For years, analysts and forecasters had debated whether computer systems or telephone systems—data or voice—would be at the heart of the “office of the future.”I A ROLM-IBM pairing would obviate that question with systems that seamlessly integrated data and voice. On news of the acquisition, both companies’ stock prices rose.
“All over ROLM there was euphoria, followed by ‘Oh, my God. What next?’ ” recalls Ron Raffensperger.8 The euphoria came from the financial bonanza the acquisition represented for ROLM shareholders. Anyone who had bought stock at ROLM’s IPO in 1976 saw a fortyfold return on that investment in only eight years. (“They are going to pay how much?” Raffensperger remembers asking.) One person recalls that even the women on the assembly line talked about the value of ROLM’s stock and where it might go.9 Fawn Alvarez’s mother, Vineta, who had not sold a single share of the stock for which she had paid $7,000 during her years at ROLM, discovered that her equity was worth $360,000 (nearly $830,000 in 2016 dollars).10
Fear quickly followed the elation. How would ROLM, with its 9,000 employees, retain its identity and “great place to work” culture after IBM, with 350,000 employees, absorbed it? At ROLM, many people wore jeans to work, and Friday-afternoon beer bashes were sacrosanct. On Halloween, ROLM’s vice president of marketing dressed as Supermanager, complete with red tights and a red cape. By contrast, IBM had an unwritten dress code (white oxford-cloth shirt, tie) and a corporate policy that forbade drinking on the job.11 IBM’s success with its personal computer—developed in secret by what was essentially an internal startup operation—offered some hope that the giant company would appreciate ROLM’s innovative and entrepreneurial spirit. A visit by three top IBM executives, who dressed down and hoisted beers at one of the Friday bashes, was also reassuring. Nonetheless, it was impossible not to wonder, as Raffensperger put it, “What will IBM do to us?”
Alvarez, too, experienced the seesaw of euphoria and anxiety. She had never received stock options. (“I’m sure if I had asked for them, I would have gotten them,” she says, “but I didn’t know to ask for them.”) She had, however, bought as much ROLM stock as she could over the previous five years, once she was out of her “young and dumb” stage. Her mother’s example had inspired her, and she knew that most of the engineers and executives bought as much stock as they were allowed. Alvarez had cashed in some of her shares so she could travel—she estimates she visited twenty-five countries in the early 1980s—but she retained enough that after the IBM acquisition she could sell what she needed to buy a house. “I was not wealthy,” she says. “But still: I was a woman, on my own, buying a home in Silicon Valley.”12
Then came the anxiety. “Okay, this is going to be really hard,” she recalls thinking. “We’ve done something amazing here. Now we are going to be bought by the most conservative company in the world. This will be hell.” She asked herself how IBM would be able to manage the acquisition, and then she decided, “I will help them. I can tell these ’beamers a thing or two about how not to wreck the place.”13 A member of the forecasting group, Alvarez did not occupy a position that traditionally had much influence—but that had never stopped her before.
I. The voice-data distinction is a bit oversimplified, since the ROLM CBX stored voice messages as data.
II. AT&T Information Systems was founded in 1984. Bell Labs, which had developed the UNIX operating system and had been designing computers for decades, remained part of AT&T, as did Western Electric, which had long built computers for internal use deep within the telephone network. Another effect of the 1982 consent decree was increased competition in long distance as companies like MCI and Sprint gained market share.