In the end, they split it down the middle.

On Tuesday, International Business Machines (IBM) announced that it has resolved the lawsuit against a newly appointed senior vice president at Apple Inc. (AAPL) that was, for a brief moment last November, the hottest story in technology — a bi-coastal drama that pitted one of the world’s largest and most established computer companies against one of the brashest.

The case involved Steve Jobs' decision to hire Mark Papermaster, a 25-year IBM veteran, to replace Tony Fadell as head of the iPod/iPhone division. (Fadell, once considered a rising star in Cupertino, was said to be stepping down to devote more time to his family, according to Apple's press release.)

IBM complained loudly and litigiously, arguing in a 10-page complaint filed last October that Papermaster was "in the possession of significant and highly-confidential IBM trade secrets and know-how" — secrets he was now in a position to deliver to a major competitor. The case rested on a noncompete agreement that Papermaster signed in 2006.

IBM management seemed to believe that the iPod division job Papermaster had been given was a subterfuge — a "placeholder," as PBS columnist Robert Cringely put it, until the noncompete year was up and Papermaster could take the job for which Cringely and others believed he was really hired: “to lead Apple’s PA Semi acquisition and create a new family of scalable processors optimized for Snow Leopard and beyond." (link)

Papermaster's lawyers argued that Apple and IBM were in totally different businesses and besides, noncompete agreements are not enforceable in Texas (where Papermaster worked for 17 years) or California (where Apple is headquartered).

On Nov. 7, a U.S. district court judge granted IBM a preliminary injunction, ordering Papermaster to "immediately cease his employment with Apple Inc."

A week later, Papermaster's lawyers filed their counterclaims. Two days after that, the judge ordered IBM to put up a $3 million bond to guarantee payment of any costs or damages, should it turn out that the injunction should not have been issued.

Things got very quiet after that.

Then, on Tuesday, IBM issued a statement that reads, in part:

"IBM and Mr. Papermaster have now agreed on a resolution of the lawsuit under which Mr. Papermaster may not begin employment with Apple until April 24, 2009, six months after leaving IBM, and will remain subject thereafter to all of his contractual and other legal duties to IBM, including the obligation not to use or disclose IBM’s confidential information. Following commencement of his employment with Apple, Mr. Papermaster will be required to certify, in July 2009 and again in October 2009, that he has complied with his legal obligations not to use or disclose IBM’s confidential or proprietary information. The preliminary injunction will be replaced by a court order under which the Court will have continuing jurisdiction over this matter, including compliance enforcement powers, until October 24, 2009, one year after Mr. Papermaster’s departure from IBM."

So Papermaster had to wait six months, not 12, before he could take the job at Apple, and he has to promise to the court that he will abide by his noncompete.

Apple's press release says only that "litigation between IBM and Mark Papermaster has been resolved," and adds that Papermaster will be reporting to Steve Jobs on April 24.

Case closed.

Here's the link to the consent order and stipulation of "dismissal with prejudice," that the two parties worked out on Jan. 24.

See also:

• The Papermaster chronicles

• Papermaster was misquoted
• IBM puts up $3 million in Papermaster case

Steve Jobs' high-profile raid on IBM's managerial ranks hit a snag on Friday.

A judge in White Plains, N.Y., ordered Mark Papermaster — IBM's (IBM) former top microprocessor executive and Apple's (AAPL) newest senior VP — to immediately stop working for Jobs.

It's the latest chapter in a bi-coastal drama that pits one of the world's largest and most established technology companies against one of the brashest. Here's a timeline:

• January 2008: Robert Mansfield, Apple's VP for computer hardware development, includes Papermaster's name in a short list of possible hires. The two were classmates at the University of Texas at Ausin and both worked at IBM.
• February 2008: Papermaster is invited to Cupertino to meet Jobs and discuss an unnamed "senior leadership position" involving product development in consumer electronics.
• A few weeks later, Apple calls to say the senior leadership position is no longer open and offers him a less senior position in laptop design. He declines.
• April 2008: Apple acquires P.A. Semi (formerly Palo Alto Semiconductor), a maker of power-efficient processors based on IBM's "Power" architecture.
• September 2008: Papermaster, whom IBM in court papers describes as the company's "top expert in 'Power' architecture and technology" [PDF], gets another call from Apple. Steve Jobs wants to talk to him.
• Oct. 7: Papermaster meets with Jobs, Tony Fadell (head of the iPod and iPhone division), and others. He's told that Fadell is leaving, and that Jobs is looking to replace him. The next day, Papermaster meets with Fadell's team.
• Friday Oct 10: Jobs makes Papermaster an offer he can't refuse — a "once in a lifetime opportunity" to head the iPod and iPhone division.
• Monday Oct. 13: Papermaster informs his superiors at IBM that he intends to accept the job. They tell him they suspect Apple's interest in him has something to do with P.A. Semi.
• Monday Oct. 20: IBM offers Papermaster a "substantial increase" to persuade him to stay.
• During the same conversation, IBM reminds Papermaster that he has signed an agreement that bars him from working for an IBM competitor for one year. [PDF] It offers Papermaster a year's salary if he will respect the agreement. Papermaster says he needs time to think it over.
• Tuesday Oct. 21: Papermaster submits his resignation the next day. He is scheduled to leave the company at week's end and start working for Apple in November.
• Wednesday Oct. 22: IBM files a 10-page complaint in the Southern District of New York to prevent Papermaster, "who is in the possession of significant and highly-confidential IBM trade secrets and know-how" from accepting an executive position with Apple. IBM describes Apple as a competitor that is trying to expand its presence in the markets for servers and chips for handheld devices.
• Tuesday Nov. 4: After the Wall St. Journal breaks the story, Apple issues a press release announcing that Papermaster had been named senior VP of devices hardware engineering to lead the iPod and iPhone division, the job formerly held by Tony Fadell (see here). Neither chips nor servers are mentioned.
• Thursday Nov. 6: Papermaster files court papers arguing that Apple and IBM are in totally different businesses — one focused on high-performance business systems, the other on consumer-oriented hardware and related products. [PDF]

• Friday Nov. 7: Robert Cringely publishes a column echoing the conventional wisdom in Silicon Valley — that Papermaster's position as head of the iPod and iPhone division is a subterfuge, a "placeholder" until his noncompete year is up and he can take the job for which he was really hired: "to lead Apple’s PA Semi acquisition and create a new family of scalable processors optimized for Snow Leopard and beyond."
• Later that afternoon: Federal District Judge Kenneth Karas in White Plains grants IBM a preliminary injunction, ordering Mark Papermaster to "immediately cease his employment with Apple Inc. until further order of this court." [PDF] IBM PR expresses satisfaction. Apple PR expresses confidence that Papermaster "will be able to ultimately join Apple when the dust settles." (link) Papermaster cannot be reached.

Papermaster's lawyers have until Tuesday Nov. 11 to submit objections. A hearing is set for November 18.

UPDATE: Reading Mark Papermaster's statement in full, I discover that it had been taken it out of context. The full quote, reproduced at the bottom of this post, makes a lot more sense. My apologies to Mr. Papermaster.

- – -

"I do not recall a single instance of Apple being described as a competitor of IBM during my entire tenure at IBM."

I did mental double take when I read those words, and I suspect I was not alone.

They were filed in a U.S. district court in Manhattan early Friday by Mark Papermaster, a 25-year IBM veteran and, as of Tuesday, Apple's newest senior VP.

Papermaster is stepping into the spot recently vacated by Tony Fadell. (See The man who made the iPod.)

IBM had filed suit to block the move, claiming that Papermaster was violating "his contractual obligation to refrain from working for an IBM competitor for one year."

Papermaster's response was that IBM (IBM) doesn't compete with Apple (AAPL) and as far as he knows, it hasn't for the past 25 years.

Huh? That's news to me — and I suspect it will be news to Steve Jobs.

I remember 1983. The IBM PC was two years old and the Apple II and III were rapidly losing market share. The Lisa came out that January, but was destined to be a commercial flop.

Jobs, who had been kicked out of the Lisa project the year before, was pouring his energy into the Mac, which would debut the following year, heralded by the famous "1984" commercial.

Jobs certainly seemed to know who his competition was. That fall, when he previewed the so-called Big Brother ad in a keynote address, he introduced it with these words:

"It is now 1984. It appears IBM wants it all. Apple is perceived to be the only hope to offer IBM a run for its money. Dealers initially welcoming IBM with open arms now fear an IBM dominated and controlled future. They are increasingly turning back to Apple as the only force that can ensure their future freedom. IBM wants it all and is aiming its guns on its last obstacle to industry control: Apple. Will Big Blue dominate the entire computer industry? The entire information age? Was George Orwell right?" (link)

I know IBM is an enormous company with many large divisions, and that for most of his career, Papermaster worked on silicon chips and servers, not PCs.

And I know that it's been several years since IBM competed in consumer electronics, having sold its Personal Computing Division to Lenovo in 2005.

But to think that Mark Papermaster could have started at IBM in 1983 and worked there a quarter century without ever once hearing Apple described as a competitor — well, it boggles this tech reporter's mind.

UPDATE: 9to5 Mac reports that in a filing made public after markets closed on Friday, U.S. District Court Judge Kenneth Karas ordered Papermaster to "immediately cease his employment with Apple Inc. until further order of this court."

For the latest on the case, see The Papermaster Chronicles.

[Kudos to Information Week's Paul McDougall for spotting the court documents. You can read more of Papermaster's statement here.]

UPDATE 2: It turns out that Paul McDougall led us all on a merry chase. Papermaster's full statement, copied below, acknowledges that IBM and Apple have indeed been competitors from time to time in the past.

This reporter's mind is unboggled and his respect for Mr. Papermaster's integrity renewed.

Big news for Apple in Tuesday's Wall Street Journal: The company is losing one of its stars, Tony Fadell.

Tony who?

If Steve Jobs didn't loom so large in Apple's public persona — drawing the spotlight at every appearance — a lot fewer people would be asking that today.

Fadell was — and until he leaves at an as-yet undisclosed time for "personal reasons," still is — the top engineer in a company renown for its engineering prowess. At Business 2.0, the now-defunct Time Inc. monthly, we ranked him No. 27 on our 2007 list of "50 Who Matter Now" in the world of business.

And when Fortune tried earlier this year to handicap who might be best equipped to replace Steve Jobs as Apple's CEO, Fadell came in No. 2, after COO Tim Cook. Here's how we described him then:

Tony Fadell
Title: Senior vice president, iPod division

With his American swagger and his hair bleached white, Fadell stood out at button-down Philips Electronics, where he led an in-house pirate operation designing Windows CE-based devices. It was there that he came up with the idea of marrying a Napster-like music store with a hard drive-based MP3 player. He shopped the concept around the Valley before Apple's Jon Rubinstein snapped it up and put Fadell in charge of the engineering team that built the first iPod. Ambitious and charismatic (and no longer a bleached blond), he now runs the hardware division that makes two of Apple's three key product lines: the iPod and the iPhone. (link)

Fadell will reportedly be replaced by Mark Papermaster, the top IBM executive who managed the company's blade server business. IBM (IBM) sued Papermaster last week over a noncompete clause in his contract to try to prevent him from joining Apple (AAPL). See here.

In a press release issued Tuesday morning, Apple announced that Papermaster had been named senior vice president of devices hardware engineering, reporting directly to Steve Jobs.

According to the release, Fadell and his wife Danielle Lambert, a VP of human resources, "are reducing their roles within the company as they devote more time to their young family. Fadell will remain at Apple as an advisor to the CEO. Lambert will depart the company at the end of this year after a successor is in place."

"You know, I think it wouldn't be a party," Steve Jobs told Fortune in February, describing the future of his company if, as he put it, Jobs got hit by a bus. "But there are really capable people at Apple. … My job is to make the whole executive team good enough to be successors."

Life at Apple without Jobs may be more than just a hypothetical. The 53-year-old Silicon Valley pioneer had a malignant tumor removed from his pancreas four years ago. With fresh concerns about his health following his gaunt appearance at the World Wide Developers Conference two weeks ago, it's fair to ask: who's on that executive team — and which ones have a shot at ruling Apple once Jobs leaves (even if he exits years from now and not for health reasons)?

There are 11 men in all — not counting Jobs. A handful are familiar faces to the small community of professional Apple watchers. As far as the general public is concerned, they are invisible, hidden in the long shadow cast by Apple's (AAPL) high-profile CEO.

Some seem more qualified to step into Jobs' shoes than others, but judge for yourself. Here they are, as listed on the company's Executive Profiles web page, in rough order of their chances of succeeding Steve Jobs.

Timothy D. Cook: Chief operating officer. A 12-year veteran of IBM (IBM) and Compaq, Cook, 47, probably has more direct line responsibility that anyone in the company — even Jobs. Not only is he head of the resurgent Mac division, but he's responsible, as his official bio puts it, "for all of the company's worldwide sales and operations, including end-to-end management of Apple’s supply chain, sales activities, and service and support in all markets and countries." Cook's deep knowledge of Apple's operations and ready command of detail has won him the respect of the board of directors and the investment community. A bachelor with a passion for cycling, he's as steady and low-key as Jobs is temperamental. A Wall Street Journal profile described Cook's dressing down of another man at a meeting as so "professional and surgical" it was only afterward that observers realized the man had just had his head handed to him. Although some wonder whether Cook has enough charisma to run Apple, when the CEO was out of commission, Cook was the executive Jobs put in charge.

Tony Fadell. Senior vice president, iPod division. With his American swagger and his hair bleached white, Fadell, 38, stood out at button-down Philips Electronics (PHG), where he led an in-house pirate operation designing Windows CE-based devices. It was there that he came up with the idea of marrying a Napster-like music store with a hard drive-based MP3 player. He shopped the concept around the Valley before Apple's Jon Rubenstein snapped it up and put Fadell in charge of the engineering team that built the first iPod. Ambitious and charismatic (and no longer a bleached blond), he now runs the hardware division that makes two of Apple's three key product lines: the iPod and the iPhone.

Ron Johnson. Senior vice president, retail. Johnson, 49, was a retailing star at Target (TGT) before he came to Apple in 2000, and he's an even bigger star today, having designed what is arguably the world's most user-friendly chain of retail stores. He shares Jobs' single-minded focus on the customer experience, and when he parts ways with Jobs — the Genius Bar, where customers get hands-on troubleshooting, was a Johnson idea that Jobs resisted — he is often right. Most retailers focus on how you find the right item, he says, how you select it and how you get it out of the store. "We said there's a bigger idea. Let's design it around the customer's life, not the moment when they're in the store." (link) Apple's second-most charismatic public speaker, he is on several outsiders' short list of possible successors.

Philip W. Schiller: Senior vice president, worldwide product marketing. An avuncular, unthreatening presence, Schiller, 47, plays a slightly rotund Sancho Panza to Jobs' Quixote at nearly every Apple event. His deer-in-the-headlight performance — caught on videotape — when ambushed by a British TV reporter at the London unveiling of the iPhone contributed to the sense that Apple would be in trouble if Jobs were ever to leave. But it would be a mistake to underestimate Schiller. He has 24 years of marketing experience — 17 of them at Apple — and his official bio credits him with delivering a long list of "breakthrough" products: iMac, MacBook, Airport, Xserve, Mac OS X, Safari, AppleTV, iPod and iPhone.

Scott Forstall. Senior vice president, iPhone software. A veteran of NeXT, where he helped build the operating system that became OS X, Forstall came to Apple with Jobs in 1997. After proving himself by managing the team that released OS X Leopard, he was put in charge of software for the iPhone. "I actually have a photographer's loupe that I use to make sure every pixel is right," he told Time. "We will argue over literally a single pixel." His profile was raised by public appearances at WWDC 2006 and the March '08 SDK announcement. In an executive shakeup three days before WWDC 2008, he was elevated to senior vice president, reporting directly to Jobs. "Forstall is the man if SJ gets to pick [his successor]," says 9to5Mac's Cleve Nettles.

Jonathan Ive. Senior vice president, industrial design. Although his name is often floated as the next Apple CEO — and despite the fact that he garnered 49% of the votes in a recent online poll that asked "who would you trust to run Apple, without Jobs?" — Ive, 41, is probably the least likely of the leading contenders to take the job. Modest and notoriously shy (when he won the 2005 Design and Art Direction award it was Jobs who made the acceptance speech, although Ive was in the audience), he guards his privacy jealously; even Apple's HR department doesn't know exactly when he was born. Ive is perhaps the most influential industrial designer of our age. Why would he give up a job he clearly loves to take on the responsibilities of a CEO?

Below the fold: The also-rans.

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