Breathe in hardware, and exhale cloud: IBM stretches its revenues, profits... in the downward dog position IBM is attributing another slow quarter to currency headwinds and purchase cycles, as Big Blue logged a dip in revenues for the third consecutive quarter. That means it's back into its old groove of shrinking sales. The enterprise compute giant saw its systems and services operations take a hit in particular during its first …
So let's recap. They spent last 20 or more years dumping their hardware production division by division, but it doesn't seem the strategy was so successful. Nonetheless they hold on to their obsession for high margin business and they are now beginning to dump even low margin services.
Well, to be honest hardware development requires management that understands technology, is willing to lead development, take risks, and thinks in terms of where it wants to lead the company (think TJ Watson and the 360 risk). That's hard to do when the company is run by risk averse bean counters who are driven by this quarters numbers and not where things will be in a few years.
They are basically stuffed. The only line that is really making money is the zOS hardware, software and services associated with it. Which will not go on forever especially as they keep sacking people who know the product line and are trusted by the customers.
The Thinkpad/intel server line is also making a ton of money -- for Lenovo -- OOPs.
As for the rest they cannot keep up the R&D budget for the (excellent) Power server line given the achingly small market share, and, premium price over the pretty much equivalent x86 hardware.
If you are going to sign a services contract and end up with a team from Mumbai then the current received wisdom is deal with a company based in Mumbai.
Cloud computing is a three horse race between Amazon, Azure and a rather lame looking google, IBM has yet to reach the first fence.
So the only sensible business plan would be to sack the millennials, concentrate on milking the last profits out of the 360 series, then, sit back and collect the royalties from the patent portfolio.
Indeed. And it only got worse when IBM sold their low and mid level Intel Server hardware Groups to Lenovo. It didn't help when their Automation tool/Artificial un-intelligence, WATSON, replaced Tech Support Teams, in an attempt to save money. Looks like it's still not working. Look for them to do the same to Redhat, as they bring in more inexperienced/skill-less Millenials to replace experienced techs who actually DID their jobs. But hey, Ginny is making bonuses for losing money and no one can do anything about that.
IBM, lest we forget, is still a large organisation which with $18bn revenue and $2bn net profit in this quarter, hardly the sign of a company for which it is 'over'...yet.
However, merely making a fairly decent profit is not sufficient for the Street and investors. Companies have to grow and here IBM has the same problem as all the other tech giants. They don't know how to grow in this new, cloudy world dominated by the likes of Amazon, Microsoft and Google.
We we see the demise of IBM? Not sure but if they can't figure out how to grow the future doesn't look good. Any denouement will take a while though; it's not over, yet.
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