Since 1990, the rate of growth of IBM has lagged behind that of the US economy.

IBM's traditional mainframe business underwent major changes in the 1990s, as customers increased their emphasis on departmental and desktop computing. However, the decade of the 1990s began with IBM posting record profits up to that point in its history. This proved illusory as the rental to lease conversion was tapping out, demand for mainframes was waning and corporate downsizing was in full swing. Corporate spending shifted from high profit margin mainframes to lower margin microprocessor-based systems and the growth in IBM's PC business was not nearly enough to offset the company's mainframe revenue decline.^{[citation needed]}

On October 5, 1992, at the COMDEX computer expo, IBM announced the first ThinkPad laptop computer, the 700c. The computer, which then cost US$4350, included a 25 MHz Intel 80486SL processor, a 10.4-inch active matrix display, removable 120 MB hard drive, 4 MB RAM (expandable to 16 MB) and a TrackPoint II pointing device.^[13]

A decade of steady acceptance and widening corporate growth of local area networking technology, a trend headed by Novell Inc. and other vendors, and its logical counterpart, the ensuing decline of mainframe sales, brought about a wake-up call for IBM: after two consecutive years of reporting losses in excess of $1 billion, on January 19, 1993, IBM announced a US$8.10 billion loss for the 1992 financial year, which was then the largest single-year corporate loss in U.S. history.^[14]

That same year, Louis V. Gerstner, Jr. joined IBM and he is widely credited with turning the company around. His strategy to reverse the decision of his predecessor and re-integrate IBM's major divisions to focus on services first and products second, is often heralded as the decision that led the company from the brink of disaster and remains the fundamental underpinning of IBM's strategy today. A byproduct of that decision was a shift in focus significantly away from components and hardware and towards software and services.^{[citation needed]}

Starting in 1995 with its acquisition of Lotus Development Corp., IBM built up the Software Group from one brand, DB2, to five: DB2, Lotus, WebSphere, Tivoli, and Rational.

In 1997 the IBM chess playing computer system Deep Blue, in the match Deep Blue versus Garry Kasparov, was the first computer system to beat a reigning world chess champion.