It wasn't an IQ test, and IBM definitely knew what it was doing in ways today's "move fast and break things" culture cannot fathom. Their software was and still is used in many mission-critical applications because the company was rigorously focused on quality. When was the last time you heard of a bug in mainframe software affecting anyone?
While I agree with you conceptually, as a daily DataStage/InfoSphere user, there are plenty of buggy IBM products. I do think a general problem solving test is way more useful for vetting candidates than some stupid algo whiteboard assessment, and my company has been using something like that to great effect to recruit jr devs.
