back to article What's a right pain in the ASCII for IBM? Its own leech-like hardware biz

IBM's earnings for the first quarter of the year show that the company's hardware division has turned into a leech sapping Big Blue's profits. IBM's total revenues for the quarter were $22.5bn, down four per cent on an annual basis and earnings-per-share are $2.54. This represented the eight consecutive quarter of declining …

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  1. Anonymous Coward
    Anonymous Coward

    "There are major shifts in our industry driven by data, cloud, and the way individuals are engaging,"

    Exactly... wait, what does that mean?

    1. Euripides Pants

      "Exactly... wait, what does that mean?"

      What he said in English: "Something is different and we have no clue".

  2. John Savard

    Brought to You by the Letter Z

    It's a pity that the Power PC has not obtained more popularity, but without a popular operating system with lots of applications, like Windows or Android, it's not surprising.

    But what about zSystem hardware? If that isn't profitable for IBM, then it might have to follow the example of Unisys, and start building everything from x86 hardware, relying on software emulation. Even given today's efficient techniques of JIT compilation, it would be a sad day when that happens.

    It's almost a pity that Microsoft didn't do what Apple did, but in the opposite direction - port Windows over to either the Power PC or SPARC, architectures which are both available to all for free or low-cost licensing, so as to bring about a truly competitive microprocessor market.

    1. Bronek Kozicki

      Re: Brought to You by the Letter Z

      Judging by tick & fast flow of commits from IBM to kvm with s390 in title, I guess that IBM are positioning POWER as prime virtualization platform on Linux. Since the platform is now open for licensing agreements not dissimilar from ARM, this is very good strategic direction.

      Hope they will be consistent in this approach, because it opens a world of opportunities to mature and very efficient CPU architecture.

      1. Victor 2

        Re: Brought to You by the Letter Z

        They are no longer investing in AIX, only on Linux and you expect Power will survive, how?

        OpenPower has existed for years and has not taken off, that will not change. There are more efficient CPU architectures, what exactly does Power brings to differentiate from x86 or ARM?

        1. Bronek Kozicki

          Re: Brought to You by the Letter Z

          more computing power and more efficient programming model for multithreading.

  3. Anonymous Coward
    Anonymous Coward

    So...

    How's that Roadmap 2015 coming along, Big Blue?

    <Bitter ex-IBMer is laughing bitterly>

    1. Anonymous Coward
      Anonymous Coward

      Re: So...

      It's coming along fine as there's bound to be more restructuring this year and early next so that they'll meet the target for Wall Street.

      $Diety knows what'll happen after that as once you sacked the people and sold off all the good stuff there's nothing left. At least Ginni and the board will have hit targets and got their nice bonus' and then they'll bugger off somewhere else.

  4. James Anderson

    But most of the other revenue is based on hardware sales.

    Most of the software IBM sells is based on top of its own hardware.

    Most of the software services IBM sells is based on software implemented on hardware it sold.

    So without the hardware sales very little software and services will be sold. Expect a decline in these as the "supplementary" software and services revenue will lag about 1 or 2 years behind the initial hardware sale.

    1. Anonymous Coward
      Anonymous Coward

      Re: But most of the other revenue is based on hardware sales.

      > Most of the software IBM sells is based on top of its own hardware.

      Arrr, nope. Over half is middleware and a LOT of which runs on x86.

    2. Anonymous Coward
      Anonymous Coward

      Re: But most of the other revenue is based on hardware sales.

      A bit overstated, but not untrue. All of the OSs are obviously directly attached to hardware (no one is buying AIX for their HP x86 servers). Tivoli is highly correlated with IBM storage. The more recently software acquisitions and other WebSphere products have nothing to do with IBM hardware, but the legacy software portfolio is tied to the hardware.

  5. Anonymous Coward
    Anonymous Coward

    Again?

    Another floundering quarter, Ginni ? Soon you'll need to transition onto a performance improvement plan or be managed out via the separation process.

    But please don't slash and burn any more in your desperate struggle to Roadkill 2015 before you go.

  6. Anonymous Coward
    Anonymous Coward

    Cloud? CLOUD?

    Akin to the "e-" fad circa 1999, IBM is trying to save itself by buying up small, non-profitable companies that have something to do with "cloud" something or other. I'm not sure how "a revenue growth of more than 50 per cent" is great if they're not turning a profit on it -- something I didn't hear that they did. Is there some magic that IBM brings that combines a huge troubled company with a new startup struggling company and has instant big profits?

    IBM is still that old mainframe company at heart, trying to run like every employee is a lifer who has nothing to do while mainframes run for 20 years between major upgrades -- so they can attend meetings, do lots of paperwork, and take lots of process/procedure training. However, probably more than 60% of their workers are contractors who probably average 2-3 years with the company. Such chaos means that no one is really certain how to do anything, and no one has a "buddy they once worked with" who can get 'em the answer. Meanwhile, the overhead on each employee is still staggering, paperwork and training requirements that their competition doesn't bother itself with.

    IBM is still saddled with government IT services contracts that will never be profitable, the product of bad estimating in the sales process, bad project management and hostility by government bureaucrats.

    And now, IBM has costs associated with previous "fixes" to remain profitable: contracts in a bad state, employee turnover and morale issues, deferred maintenance, missed deadlines, etc. It's like someone who guts their house to sell off fixtures to make their mortgage -- the bank doesn't know until the first payment is late, and the neighbors don't know until the building collapses. I wonder if things are nowhere near the rosy estimates by many Wall Street investors?

  7. Anonymous Coward
    Anonymous Coward

    Profit leeching?

    Funny thing about that... there is pretty close to zero investment in hardware, and it pulls in perhaps 30% margin. Software gets a huge investment, and ignoring the investment pulls in perhaps 60-80% margin. But including that investment and the margin is... 30-40%.

    Stop the software investment, and sales drop to zero and the margin goes negative within a few years.

    It is a big company problem, look at Intel or even Apple-- you can only get so big then either the piranhas come after you, the c-suite goes postal (like HP), or growth slows simply because the pond is completely filled.

  8. Hi Wreck
    Mushroom

    It's all an illusion.

    You can't grow a company by cutting.

    http://www.zerohedge.com/news/2014-04-17/big-blue-stock-buyback-machine-steroids

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