IBM To Split Into Two Companies By End of 2021 (arstechnica.com) 88
IBM announced this morning that the company would be spinning off some of its lower-margin lines of business into a new company and focusing on higher-margin cloud services. Ars Technica reports: During an investor call, CEO Arvind Krishna acknowledged that the move was a "significant shift" in how IBM will work, but he positioned it as the latest in a decades-long series of strategic divestments. "We divested networking back in the '90s, we divested PCs back in the 2000s, we divested semiconductors about five years ago because all of them didn't necessarily play into the integrated value proposition," he said. Krishna became CEO in April 2020, replacing former CEO Ginni Rometty (who is now IBM's executive chairman), but the spin-off is the capstone of a multi-year effort to apply some kind of focus to the company's sprawling business model.
The new spin-off doesn't have a formal name yet and is referred to as "NewCo" in IBM's marketing and investor relations material. Under the spin-off plan, the press release claims IBM "will focus on its open hybrid cloud platform, which represents a $1 trillion market opportunity," while NewCo "will immediately be the world's leading managed infrastructure services provider." (This is because NewCo will start life owning the entirety of IBM Global Technology Services' existing managed infrastructure clients, which means about 4,600 accounts, including about 75 percent of the Fortune 100.)
See also: Cringely Predicts IBM 'Disappears Into Red Hat'
The new spin-off doesn't have a formal name yet and is referred to as "NewCo" in IBM's marketing and investor relations material. Under the spin-off plan, the press release claims IBM "will focus on its open hybrid cloud platform, which represents a $1 trillion market opportunity," while NewCo "will immediately be the world's leading managed infrastructure services provider." (This is because NewCo will start life owning the entirety of IBM Global Technology Services' existing managed infrastructure clients, which means about 4,600 accounts, including about 75 percent of the Fortune 100.)
See also: Cringely Predicts IBM 'Disappears Into Red Hat'
Talk of IBM, remind me of its keyboard... (Score:2)
I wish IBM all the best but still miss its early 90s keyboard.
So strong, durable and in a class of its own. Sadly, nothing compares to it to this day.
Re:Talk of IBM, remind me of its keyboard... (Score:5, Informative)
Unicomp [pckeyboard.com] is the same people still making the same keyboards. IBM included the keyboard division when they spun off Lexmark, who then they only wanted to make printers, so a group of the keyboard employees started Unicomp and bought the licenses and tooling.
I'm typing this on a 13 year old Unicomp buckling spring model, updated with USB and a couple of additional logo keys common on newer keyboards (which I map to Super and Compose).
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If you can get your hands on one I still think the original Model M is best. I'm currently using an '84, I have a stash of 4 in the garage in case this one breaks but to be honest I don't think I'll need all of them. Of course by the time my kid gets around to needing a PC I'm sure he'll look at them in horror :)
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I have a 1984 Model M as well that I used for many years... but last time I tried to use the adapter chain (big DIN to PS/2 to PS/2-to-USB adapter) it wasn't reliable. From what I read, it was because the keyboard could try to draw more current than most PS/2-to-USB adapters supplied.
The current Unicomp keyboards feel the same though, so I'm good with the USB variants from them. The one I'm typing on is the exact same case, just in black rather than beige. I also have one of the smaller-footprint models (sa
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I'm using a Focus FK-2001 [deskthority.net] I bought in the early '90s for about $20 with a 5 pin DIN to ps/2 converter and a ps/2 to USB converter, so it's rapidly approaching 30 years old. It has very nearly the same sound and feel as the old IBM keyboard but is a little lighter (weight and feel).
I mapped capslock to compose because I hated capslock anyway.
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So sad. Another iconic company, in business for over 100 years, destroyed by corrupt incompetent management.
Re:Talk of IBM, remind me of its keyboard... (Score:5, Interesting)
They haven't been destroyed, they've been saved and transported into the Future by open source and good management.
They're splitting, so they can dump all the legacy dinosaurs into a hole, where they can eat each other until their longterm support contracts expire, and all the good people go to the new company that used to also be RedHat. The new stock will just have the good parts, that are projected to keep doing well.
This is their bridge, and slashdot and all of the open source community helped build it for them. Don't be sad, we did it!
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Which company gets to keep Power systems, AIX and IBM i?
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EPS (TTM) IBM $8.81 industry avg $3.54
P/E (TTM) IBM 14.93 industry avg 55.37
P/E (5-Year Avg) IBM 15.09 industry avg 37.45
They don't care if you've heard of them. They create earnings, and then they pay dividends.
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Cringely Predicts IBM 'Disappears Into Red Hat'
I predict IBM management will disappear into their own cloaca.
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Sadly, 80% of what used be IBM's hardware business (desktops, laptops, servers, monitors, etc) are all done by Lenovo now.
What's basically left now is:
Some floundering software products (Websphere, DB2, etc) that are losing market share
An IT outsourcing organization with a bad reputation
A small and shrinking mainframe business
The 5th largest cloud hosting company, which is getting slaughtered by AWS and Azure
and Red Hat. They haven't owned Red Hat long enough to screw that one up, yet.
Re: Talk of IBM, remind me of its keyboard... (Score:4, Informative)
And mainframes. They still make mainframes, and people still buy them.
Sun ram IBM mainframes to manage their internal financials.
https://www.forbes.com/forbes/... [forbes.com]
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To be fair, the language in their proposal was so opaque they might have been offering to build me a greenhouse for all I know.
After my boss and I went through it we didn't even bother phoning them back for an explanation, and they didn't call me again either.
On the whole it was a strang
Re:Talk of IBM, remind me of its keyboard... (Score:5, Interesting)
It reminds me of when I was at IBM and was asked to ride shotgun on a visit by sales to a prospective account. The account was big enough to have my org want to help win, but not enough to send anyone too important so I went with the salesperson to provide the deep dive info as the prospective client might want.
Now in the customer introduction, they basically told us "we've done some research and asked around and we are ready to talk about how to order product A". I think "oh, this seems like a slam dunk, and they want a product that is pretty distinctive to IBM and high margin to boot. I wouldn't make the same choice but IBM sales should be ecstatic that the customer wants a high-margin, high lock-in offering we have without as much direct competition in the market."
Then the sales person proceeds to try to talk them out of product A and into product B, a cheaper design with lots of direct competition in the market with low margins. The customer expressed what was so wrong with B and why they want A instead.
The rules of engagement were clearly I was not to intervene except to answer technical questions, so I was quiet until a break and I asked the sales guy why it seemed he was torpedoing an easy high value win. He said "that is true, however the current incentive for sales does not reward me personally for sales of A, and I'd have to turn it over to some other guy if the customer wants that, and as far as I'm concerned the customer might as well kick us out if they won't take B."
So ultimately we left empty handed from a customer that seemed to be trying really hard to give us a lot of their money.
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Who gets the B? (Score:2)
or will it be just "I" and "BM".
Clean split or shell? (Score:2)
I wonder if it would be a clean split (i.e. completely different incorporated company with a different board) or a separate company under the same corporate umbrella that are financially independent (like Google did with Alphabet).
Re:Clean split or shell? (Score:4, Informative)
September 2009 IBM sells its U2 multivalue database and application development products to Rocket Software
April 2012 IBM sells its Retail Store Solutions to Toshiba TEC [
January 2014 IBM sells its IBM System x business to Lenovo
October 2014 IBM sells its chips business to GlobalFoundries.
December 2014 IBM sells Rational to NICOM Global
January 2015 IBM sells Algorithmics Collateral to SmartStream Technologies
December 2015 IBM Rational System Architect to UNICOM Global
December 2018 IBM sells some of their product lines to HCL Technologies
2021 IBM sells it's Managed Infrastructure Services to ___ ?
Maybe there will actually be a new company and IBM will keep X% of the stock for Y months. Maybe.
Re:Clean split or shell? (Score:5, Informative)
September 2009 IBM sells its U2 multivalue database and application development products to Rocket Software
April 2012 IBM sells its Retail Store Solutions to Toshiba TEC [
January 2014 IBM sells its IBM System x business to Lenovo
October 2014 IBM sells its chips business to GlobalFoundries.
December 2014 IBM sells Rational to NICOM Global
January 2015 IBM sells Algorithmics Collateral to SmartStream Technologies
December 2015 IBM Rational System Architect to UNICOM Global
December 2018 IBM sells some of their product lines to HCL Technologies
2021 IBM sells it's Managed Infrastructure Services to ___ ?
Maybe there will actually be a new company and IBM will keep X% of the stock for Y months. Maybe.
I'm in one of those groups that was sold off. I can promise you - we are doing much better under new company management vs. IBM management. There are times in a large company when it makes sense to divest a dying business + let it ride off into the sunset. And, there are times when you divest because your senior management has no clue how to take a cash cow and adapt it to changes in the market - no matter the engineering talent available. My group is successfully growing under new company vs. shrinking under IBM + customers are happy.
Posting as AC for obvious reasons.
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And, for a technology company like IBM, there are time when it's time to release legacy technology that may be distracting from higher value investments.
Doesn't mean those products aren't good and profitable products, but rather they are distracting from MORE profitable investments.
Re:Clean split or shell? (Score:4, Insightful)
Separate, this is just a place for liabilities and unprofitable business units that have longterm contracts to be severed to, to provide a few cost+ services that will shrink over time until it dies. That part of the stock won't be worth anything once it hits the market. It will have a bunch of paper value before that.
Keeping it is exactly what they don't want to do.
Why link to Cringely's incorrect predictions? (Score:5, Insightful)
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Yeah, obviously RedHat disappeared into IBM and became IBM from within, that's not even the same genre as his weird story.
IBM is now in "the integrated value proposition" b (Score:2)
They aren't a hardware company, nor a software company are they a cloud host. What are they?
What the hell does 'integrated value proposition' even mean? It sounds like vendor lock-in.
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Not yet. Some market research company posted a projection through 2027 promising crazy exponential CAGR thaat will accelerate based on a mix of historical trends, information gathered from providers and customers, and then mostly whatever they pulled out of their ass.
Comment removed (Score:4, Informative)
Re:IBM is now in "the integrated value proposition (Score:4)
When my employer was in the market for a marketing stack/CRM, IBM was one of the companies that pitched to us. Basically expensive SaaS applications that require hundreds of hours of IBM consultants to customize. It's VERY high margin..
That's the hot new scam in the business world. Selling expensive bullshit to people who are spending someone eles's money (i.e., corporate purchasing managers).
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Re:IBM is now in "the integrated value proposition (Score:4, Insightful)
It's a fairly depressing progression of the tech industry broadly. I used to work at IBM and recall some things.
Initially, training and consultancy costs were a necessary evil and competition drove improving products to mitigate those needs because they were seen as expensive and had a chilling effect on getting the market to buy product.
While everyone did move the same way, nothing better illustrates the pivot in thinking than 90s IBM decision to double down on those expensive training and consultancy. They explicitly made it their corporate strategy to focus on that bs overhead (and it probably saved the company). From that point forward, it was well understood that if you worked on hardware and software, your job wasn't to make it easy to own and use, but to give marketing fodder to get customers to buy it and then need the help and that's when the real profit starts going. An initiative to revamp a product would be shot down in a heartbeat.
One time I recall a customer that had bought some of our software and just hated it. There was a competitor on the market that had similar but generally much better regarded. The sales team pulled in the development team and said "we will lose this account if you guys don't intervene and address their problems". The response was "the software is fine, they just need to learn to like it, we offer training to help users become acclimated to our software, so long as the customer is willing to pay extra for it".
Sadly, financials have proven time and time again that in the aggregate, competing on ease of ownership is a good way to drive yourself out of business in the corporate technology market. Now you don't even get to install the software or have perpetual licenses and, if the company has *really* done it's job, impossible to even use the software without giving even more money.
IBM is definitely software (RedHat/JBoss)!! (Score:3)
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It means you can now pay IBM prices to run OpenShift, which is basically a fork of Kubernetes that they support. Wake me up when they're gone.
Great for those original Redhat shareholders though. They laughed all the way to the bank.
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They aren't a hardware company, nor a software company are they a cloud host. What are they?
A brand.
And that's about it. Just like RCA, Polaroid, Newsweek, etc. The owners of that brand won't actually make anything. They'll just use the brand name to peddle whatever the latest thing is. Hell, maybe they'll even license their name out one day like the owners of the RCA brand do now.
The IBM that you either loved or hated is long gone. It's just a label now that still makes money because of brand recognition. They're hoping new customers will see IBM and think of the Big Blue of old. But it's becomi
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Power systems are still popular.
Those who use AS400/iSeries/IBM i are fiercely loyal, and they're not a niche.
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They are a niche. They are a profitable niche, but still a niche.
On POWER, I heard from a RedHat employee who worked on POWER before acquisition and said IBM basically directed them to work *less* on POWER because the only IBM hardware they truly cared about was mainframe.
I had read some IBM i users bemoaning that IBM is glad to take their money, but seems to be doing the absolute bare minimum for the platform anymore.
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For example, the professional services unit they want to get rid of is a place where a bunch of engineers answer the phone when your engineers can't figure it out.
That's a money loser now, because the labor overhead is expensive and inflexible. And their other units are selling the complete service, so the client no longer has their own idiot engineers. They no longer have to pay half again the engineer's salary for a team of handholders. Instead they pay less money, most of the servers get moved to IBM's d
Re: IBM is now in "the integrated value propositio (Score:2)
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Yes it does, that's what managed services are all about.
IBM doesn't compete at the low end that you're talking about.
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Every sufficiently large corporation seems intent on transforming themselves from a "company that makes and sells products" into some sort of nebulous "solutions provider" that doesn't seem to produce anything beyond fancy marketing presentations.
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It's a good way to tell which companies have dinosaur C-suite execs that really need to be replaced.
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'integrated value proposition'? Almost but not quite unlike the sum is greater than the parts. Take yer basic pile of shit. The sum is certainly greater than the shit atoms of which it is composed. It is in this sense that IBM is using the phrase.
IBM (Score:1)
Mainframe Business? (Score:2)
So is their old mainframe and storage business going with NewCo?
Systems stays (Score:4, Informative)
Nope, hardware, including mainframes, is staying with IBM.
Slide 19 [ibm.com] lays it out.
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Re: Systems stays (Score:5, Insightful)
Mainframes have outlasted minicomputers, microcomputers, client-server, and now we're running virtual machines 'in the cloud' - something mainframes were doing in the mid-seventies.
Re: Systems stays (Score:2)
I don't know your age, but I can almost guarantee you that your income taxes for the rest of your career, and your social security payments, will be processed on mainframes.
Marriott did something like this too (Score:4, Interesting)
And move all the debt into the 'other' company.
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I wish I had mod points for this, it's an insanely common thing to do to spin-offs.
The death by a thousand cuts (Score:2, Insightful)
Does not seem like they have a clue what their business is.
Sad
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We've seen this before (Score:2)
Didn't Sears sell-off or divest their brands throughout the 2010's? How did that work out for them?
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Sears sold valuable brands to raise money.
IBM is spinning off non-valuable stuff.
Not comparable.
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What Sears sold that ruined them was their real estate. Nobody cares about their brands. In fact, their brands are an active detriment, people think they are low class.
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I don't know about the rest, but Craftsman was at least a very well respected tool brand, mainly on the strength of the warranty.
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It was. But now you can get tools with a lifetime warranty at any Autozone, or at Harbor Freight, and the quality of Craftsman tools has gone way down.
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FWIW Craftsman was one of the last brands that they sold. I don't even really know if it was sold or if they just started licensing it.
International Business Mismanagement? (Score:5, Interesting)
I remember the good old days when I was rooting for IBM to succeed with OS/2 Warp as my favorite operating system and well known and loved products like the Thinkpad laptops and great quality PC keyboards.
But you know? Even back then, they were really difficult to love because they kept making blunder after blunder. They sold their own line of desktop workstations that came preloaded with Windows NT and weren't even OS/2 compatible, for example! And if you ever tried calling them for support, you were handed off from department to department as everyone tried to figure out who you actually needed to talk to for your issue.
And as much as IBM insists getting out of the PC hardware business was a good move for them? I find the reality much more that IBM just wasn't able to manage that part of the company efficiently enough to be profitable. The Thinkpad notebook line was well respected by businesses everywhere, and those laptops used to be the favorites of road warriors and traveling salespeople. Lenovo has certainly done well with the products after buying the rights from IBM.
I see today's IBM as chasing after whatever they think will maximize profit margins for them while continuing to run a very inefficient business. (If you make all your money from consulting work, you don't have to stock ANY physical inventory or handle any kind of product returns. If you chase after cloud computing, you get to charge big margins to host other people's stuff on your centralized systems where you might develop a web app, framework or tool once but resell it many thousands of times to different customers.) All of that will help allow a "far from tightly run business" to stay in business. But it's sad IBM couldn't find a way to be much more successful with some great products they made in the past.
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... But it's sad IBM couldn't find a way to be much more successful with some great products they made in the past.
In the computer business, you move with the technology and the market or you die. IBM made some wonderful mainframes back in the day, but a computer with the specifications of a System/360 model 65 would be considered an "embedded" computer today. It was before my time, but I have been told that the IBM 650 became obsolete when the hourly cost of the air conditioning to keep it running was more than people would pay for time on it.
I think IBM has kept the mainframe business mostly because it helps interna
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JFC, a six-digit ID and you still don't understand what a mainframe is.
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JFC, a six-digit ID and you still don't understand what a mainframe is.
I don't see how the number of digits in your ID relates to understanding mainframes. I have operated and coded for the IBM 7090, the Burroughs B5000/B5500, the DEC PDP-6/PDP-10, and various VAX computers, though not the largest. In addition, I was once in the same room as an IBM 704. In what way an I failing to understand mainframes?
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Your conflation of an old mainframe with a modern embedded system.
Apples!=oranges, no matter when they were grown.
I would expect that kind of flawed comparison from someone whose only experience is with racks of intel servers.
If there were cost-effective ways to run certain businesses on racks of intel servers, rather than mainframes, then why have those businesses continued to use the latter? "Because it's too expensive and risky to migrate", AKA it's not cost-effective.
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Your conflation of an old mainframe with a modern embedded system.
Apples!=oranges, no matter when they were grown.
I would expect that kind of flawed comparison from someone whose only experience is with racks of intel servers.
If there were cost-effective ways to run certain businesses on racks of intel servers, rather than mainframes, then why have those businesses continued to use the latter? "Because it's too expensive and risky to migrate", AKA it's not cost-effective.
The IBM System/360 model 65 CPU has a 300 nanosecond cycle time (3.33 MHz), 750 nanosecond memory (1.3 MHz), is limited to 1 MiB of its 750 nanosecond memory (more memory is slower), and runs one instruction at a time, except that a store at the end of one instruction can overlap with the beginning of the next.
The clock speed corresponds to about an Intel Pentium II from 1997. The Rasberry Pi Zero, a modern embedded computer, has a clock speed of 1,000 MHz and a RAM limit of 512 MiB. Modern RAM has a lat
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IBM has kept the mainframe business because there are critical functions that people have tried to put on RISC machines and failed. Those people still use mainframes.
Mainframes are good for critical functions because they are highly reliable, and they are good for big data processing jobs because they have a lot of I/O capacity. Neither of those characteristics precludes being a RISC computer. Most of today's computers use a RISC processor to interpret the instruction set--IBM pioneered this approach with System/360. The exceptions are computers that let you code using the RISC instruction set directly, such as RISC V.
Splitting up (Score:3)
Ok.. so one of the companies will be called M ("I be M") .. what will the other be called?
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Ok.. so one of the companies will be called M ("I be M") .. what will the other be called?
!M
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B. "I B."
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Ok.. so one of the companies will be called M ("I be M") .. what will the other be called?
DebtCo, where all negative money amounts go to die. Just think of Maxwell's Daemon, except with Corporations and Money. Good stays HERE; bad goes THERE.
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since a spinnoff, "S". You'll then have S & M.
Hybrid cloud? (Score:4, Funny)
What is that, like the Prius of cloud technology?
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In IBM speak, it is a trojan horse of computing to install on site that hooks the customer into upsell to IBM cloud services.
International Business on one side (Score:2)
DXC (Score:2)
So any bets yet on when 'Newco' will merge with DXC and start hiking these prices like crazy as a monopolist?
With CSC and HP having already merged their enterprise services into it it seems like a matter of time?
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I'm assuming one of the Indian outsourcers (Wipro, TCS, etc.) will buy both NewCo and DXC. There are still enough companies out there who don't care about or understand IT, and these outsourcers make tons of money selling them hundreds of cheap employees elsewhere. Still, with SaaS and the cloud, the market for this kind of work is getting smaller.
Didn't work for HP (Score:2)
What's wrong with this picture? (Score:2)
IBM 1990: "Services are the future, hardware is becoming an offshored commodity."
IBM 2020: "Services are unprofitable, cloud hardware farms are the future!"
Funny words (Score:1)
CEO Arvind Krishna acknowledged that the move was a "significant shift" in how IBM will work, but he positioned it as the latest in a decades-long series of strategic divestments. "We divested networking back in the '90s, we divested PCs back in the 2000s, we divested semiconductors about five years ago because all of them didn't necessarily play into the integrated value proposition,"
READ: We want to take the divisions that we have already milked as we ran them into the ground for short term gains to pay
IBM RIP (Score:2)
My IBM laptop from 1999 still runs fine.
But when I worked for IBM in the 80s it was already clear to me from their bureaucratic inertial morass of bean-counter decision-making and recent failures that they were on a downward spiral, unable to compete with the agile silicon valley and predatory Redmond.
They are like an old lion, scraggly and limping along, still bagging a few kills now and then, but whose days are obviously numbered.
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But does it still play into the integrated value proposition?