By David Ignatius

Monday, May 3, 1999; Page A25

SOMERS, N.Y.—Strange as it may sound, the hottest technology company in America right now may be the Lazarus of the computer world, International Business Machines Corp.

Having survived its near-death experience in the early 1990s, IBM is now roaring into the 21st century. Its stock price roughly has doubled over the past year, and it has increased nearly tenfold since Lou Gerstner took over as CEO in 1993.

The best chapters of the IBM redemption story actually may lie ahead. In a series of interviews last week, IBM executives here argued that their company is ideally positioned to ride the new wave of technology that is breaking over the industry. It's a wave that could swamp even the techno-giant of the '90s, Microsoft. But in a modern illustration of the old saw -- what goes around, comes around -- once-feeble IBM now may be poised to dominate this next period of convulsive change.

The new wave is known by various buzzwords in the industry. It's the "networked world," the "post-PC world," the "interconnected world." It's a world that soon will feature more than a billion computer-like devices -- embedded in telephones, pagers, automobiles and household appliances, in addition to the familiar PC -- all able to talk to one another and to the companies that provide us services.

IBM's obsession these days is becoming the leader in this world of "pervasive computing." An internal document prepared for its 300,000 employees recalls the industry's skepticism back in 1995 when Gerstner first articulated his strategy for the "network-centric world." The document notes that the industry "laughed" at Gerstner's arguments that "the Internet will be about business, not browsing -- and working, not surfing." Nobody's laughing now, especially on Wall Street.

What will this interconnected world look like? IBM executives offer glimpses as they describe some of their strategies for wiring up the globe for what they call "e-business":

Mark Bregman, who runs IBM's pervasive computing unit, is building software that will allow all the gadgets in our lives to talk to one another. In the networked home, we won't just be able to dim all the lights. The refrigerator will tell its manufacturer when a part is about to fail and order a replacement.

Driving to work in Bregman's world, we'll be able to do our banking, make travel reservations, buy and sell stocks -- using a wireless phone or a computer that can recognize our voice. If our car begins to sputter, it will send the manufacturer a trouble report and receive an instant diagnosis. If we stop for a soda at a roadside vending machine, the machine automatically will notify the distributor when it's time to restock Diet Coke.

Susan Whitney is in charge of marketing IBM hardware. Even after the turmoil of the early '90s, she says, IBM remains the leading maker of the computers that drive networks, known as "servers." They range in price from as little as $2,000 to more than $1 million, and they're capable of running any operating system -- from Microsoft's Windows NT to Unix. That openness and adaptability is part of IBM's sales pitch.

Patricia Sueltz is leading a team of more than 3,000 software developers who are writing programs in a language called Java that will allow applications -- from word processing to electronic banking -- to run on an array of devices, regardless of what operating system they use. "Our customers want inclusivity . . . and interconnectivity," she says.

Steven Mills oversees IBM's "software solutions" business. His hottest product these days is the "middleware" that can connect servers seamlessly with a range of devices. When trying to persuade customers to buy IBM over Microsoft, he stresses the traditional "family values" that made IBM's old mainframes work: "reliability, scalability, availability."

Neil Isford is managing the transition of IBM's 130,000-strong Global Services unit to e-business. This huge international service operation is the company's fastest-growing source of revenue -- and it may be IBM's most potent weapon for wiring up the world.

Isford's teams are helping companies put every aspect of their business online -- from employee communications to customer sales to inventory management to purchases from suppliers. He describes a recent example in which IBM built an e-business system for a bank in Denmark, then used that technology to build systems for a U.S. bank in Singapore, a Korean bank in Seoul and five banks in China.

How did the technology dinosaur rejuvenate itself? Much of the credit goes to Gerstner. He made two crucial decisions when he took over: First, he decided to keep the company together. The reason, aides say, was that he listened to IBM customers, who said they still wanted a big, integrated IBM that could offer hardware, software and services.

Gerstner's second smart move was to retain IBM's traditional emphasis on research. During his first visit to IBM's famed Watson Research Center, Gerstner told the nervous computer scientists to stop trying to talk CEO-speak: "I want to hear about the things you're afraid to tell me -- that may or may not work, but if they do, they'll change the world."

The networked world IBM wants to lead is, almost by definition, an open world. With so many devices and applications, it will be impossible to maintain a neat proprietary architecture such as the Windows electronic desktop. That's obviously bad news for Microsoft -- a company whose business dilemma increasingly resembles that of IBM in the profitable but hidebound years before its fall.

IBM's head of research, Paul Horn, ponders what he would do if he was responsible for marketing Microsoft's gargantuan new operating system, Windows 2000 -- which, with more than 35 million lines of code, is the largest program ever written.

"I'd cut my throat," jokes Horn. But then he pauses, remembering the not-so-distant past at IBM. "Boy, does that remind me of where we were. I just want to pat them on the back and say, 'good luck.' They'll have to do what we did -- try to reinvent the company from zero."