
Warren Buffett says he dumped a third of his IBM stock - MilnerRoute
http://money.cnn.com/2017/05/05/investing/buffett-ibm-sale/index.html
======
deckar01
A friend of mine was an employee at a technology support company that
supported Walmart's servers, registers, and probably more that I was not aware
of. That company recently lost it's contract to IBM. They offered many of the
employees contracts at IBM, but the general feeling was that many of them are
just there until they finish training their overseas replacements. I tried to
find a source to backup this info, but did not find anything. My only source
is a reference check from IBM for one of the employees.

I'm not sure how much of an impact a contract of this size has on IBM's value,
but it indicates to me that their competitors are a contract renewal away from
being absorbed by IBM.

~~~
sumoboy
Pretty common practice at IBM to get an account, migrate all the people over
and then transition them to india, brazil, and mexico at dirt cheap rates.
Only 1/10 of converted employees will be left after 2 years.

Watson is trying to force a solution to a typically unknown problem and not
the reverse. Projects like this always fail. IBM has failed to make a cloud
presence with there own products. Buffet's own investing rules is to
understand the product, so maybe he's finally coming to his senses even IBM
doesn't understand it's own products and the market demand.

~~~
dudus
Can confirm. I'm Brazilian and my first job out of college was for IBM
supporting a US company systems. I was not even an employee of IBM, I was
officially a contractor serving IBM serving a US company. Engineering was all
in India and support in Brazil because we had timezone overlap and better
English accent.

It's a solid business plan if you ask me. There's a lot of money to be made on
outsourcing operations that don't need to be in the US.

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tuna-piano
Seems like Warren believes a big reason IBM hasn't done well is because of
AWS:

"What they [IBM] have run into is some pretty tough competitors. And What I
would say is Amazon, which, I've never seen a guy succeed in two businesses
simultaneously that are really divergent in terms of customers and operations
[Retail and AWS]"... he then praises Jeff Bezos even more.

Question/quote starting at around 11:00

[http://video.cnbc.com/gallery/?video=3000616150](http://video.cnbc.com/gallery/?video=3000616150)

~~~
nickpsecurity
He's wrong this time. The similarities were more important than differences.
Amazon was a logistics company great at moving lots of stuff on the cheap.
That made them a retail powerhouse. Then the did the same for server hardware,
networks, and VM's. They already had a lot of that, too, from being big
eCommerce site.

~~~
tuna-piano
I'd suggest that a big reason for the success of AWS is not the efficiency of
their data center operations, but the quality of their software. AWS is a
software company that happens to sell cloud software. The pricing of their
core services is not necessarily lower than the IBM/Google/Microsoft
equivalents. People choose AWS because of the breadth and depth of the
ecosystem compared to Google/IBM/Microsoft.

The old quote "Nobody ever got fired for choosing IBM" had some truth to it,
as IBM was the safe default choice. In the cloud, the truth seems to be
"Nobody ever got fired for choosing AWS". AWS is the safe default choice...
you'd really need a good reason to go with IBM in the cloud.

~~~
nickpsecurity
That sounds true today. Didnt ot originally just have one or two services?

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scottLobster
I guess Buffet isn't that bullish on AI, Watson seems to be one of the leading
contenders there.

Edit: Given that this is HN, I suppose I should clarify that I'm using "AI" as
a catch-all term for Machine Learning/Language Processing/Deep Learning/etc. I
apologize for any confusion or emotional distress my use of a commonly
understood general term apparently caused...

~~~
ebbv
Except Watson, Siri, Alexa, etc aren't real AI. They are very specific
applications for a specific task. The idea that they are AI has been great for
marketing and creating another "Strong AI is around the corner bubble."

But look at how slowly they have evolved. Siri is barely better than she was 5
years ago. I haven't seen Watson really do much beyond the same language
processing and information lookup stuff it did on Jeopardy years ago. The
other assistants are somewhat evolved versions of Siri. But they all require
special coding to teach them any new task. None of them is really anything
like true AI. They are AI only in the sense that they are programs which
appear to exhibit intelligent behavior in a very narrow and specific role,
like an AI opponent in a video game. But I strongly believe we are not
appreciably closer to true AI than we were 10 years ago. We are just in
another bubble like the 80s because the people with money don't understand the
massive gap between Siri and Hal.

~~~
adrianN
I guess you're one of the people to whom there is no "real" AI below general
purpos, human-level intelligence. To me, the "simple" language processing and
information lookup that Watson does is most definitely AI. Jeopardy is not an
easy game and beating the best humans at it was an amazing break-through.

~~~
serf
> Jeopardy is not an easy game and beating the best humans at it was an
> amazing break-through.

The Jeopardy game was marketing. The Kasparov game was marketing. Both were
very impressive, but they were marketing.

I think it is telling that whenever anyone mentions IBM and AI near each other
in speech that mention of a public AI project (see:marketing demo) is usually
just a moment away.

It would be much more impressive to me if someone once said "Oh Company X
saves Y amount using Watson" or "Watson tech enables X" which are examples
that are _easy_ to come up with when speaking of IBM's competitors.

~~~
narrowrail
>Both were very impressive, but they were marketing.

Determining product-market-fit, and go-to-market strategy are also
'marketing.' Most of the time (and, definitely in this case), when people use
the term 'marketing' on HN, it is better replaced by promotional/advertising
which are much more specific/ meaningful.

------
bitmapbrother
I'm surprised Buffet didn't dump all of his IBM stock holdings. When you have
20+ straight quarters of not making your numbers something is seriously wrong
with the direction the CEO has charted. Ginni Rometty should have been fired
long ago for her incompetence.

~~~
guitarbill
> Ginni Rometty should have been fired long ago for her incompetence.

Although I agree, I'm sure the 5 layers of clueless, infighting management
deserve no blame. There's too much dead wood for even the best CEO to make a
difference

~~~
bitmapbrother
They could always offshore their 5 layers of clueless management. This would
enable better synergy between the offshore employees and the clueless offshore
management.

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crb002
Buffett's holdings all see decreased IBM spending on the horizon. Buffet knows
IBM will need a massive bond infusion as a life raft. Sell the stock now, lend
proceeds back to IBM at 12% interest, and buy the shares back at half price.

~~~
runeks
In my opinion, there's no way in hell IBM will end up paying 12% interest on
any bonds issued. 20 years ago, perhaps, but not today.

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hackuser
> "I think if you look back at what they were projecting and how they thought
> the business would develop, I would say what they've run into is some pretty
> tough competitors."

What market segment is he talking about, and who are the competitors?

~~~
ghaff
AFAIK, he hasn't been any more explicit than that, but my guess is that he's
talking about cloud providers especially Amazon, Google, and Microsoft.

IBM made a push to be a cloud provider fairly early on. However, aside from
the fruits of its Softlayer acquisition, none of that has really panned out--
at least not at a scale relevant to IBM's financials.

------
rodionos
While IBM is rotating through futuristic themes each year (Smart Cities,
Watson, Predictive Analytics), its enterprise customers are lagging behind.
Attend an average IBM user group meeting in your area, and you'll see that
these customers are busy maintaining core systems with an increasingly
outdated tooling. They're struggling with more mundane issues such as
integration, reliability, compliance - all of these under cost pressures.

Also, Power is not selling that well in the mid-range segment. The new
workloads are being designed for horizontal scalability which is where Linux
comes in.

------
Entangled
IBM could be the best cloud foundry in the world but they refuse to open their
gates to hobbyists, ignoring that they will become influencers and influencers
bring more users to their platforms.

If I was a Bluemix head honcho I'd create a twin foundry 'Hobbymix' free for
all, no questions asked, no credit cards, no resource limits, watson enabled,
just play and get addicted with all the cool toys. Then when you're ready,
just transfer it all to our enterprise-ready, pro-version at Bluemix with pro
level support.

That's how MS took the world by storm. That's how Android is taking it from
Apple who's ignoring the poor bases focusing only in the 10% which in the long
run will cost them the whole market. That's how Whatsapp took the messaging
markets.

Technology is a winner takes all approach, like Google or Facebook. You have
to have the whole world using your services no matter what, whether they bring
money in or not. Then you can figure out how to milk them, how to show them
your new toys and convince them to pay for them, or at least how to praise you
for being the cool guy on the block. They have the resources, they need the
vision.

I still have test pages I developed on Google App Engine a decade ago. It
costs them nothing for I seldom use them, but they have a loyal follower and I
go to them for my quick hacks. Instead, Bluemix first didn't allow me to have
test pages, now they allow me but with a warning that they will be deleted
after a year, plus they charge me for everything I try to use like databases.
Bye Bluemix, moved to Heroku now for my tests with free space and free
databases. Now you want me to use your new free database? Too late. See? Make
it all free, everything, and I may give it a last try once again.

Some may say they focus on enterprises because hobbyists are an annoyance.
Sure we are, but we also are the ones who write blogs, twits, who shake the
social webs. And people listen to us.

Do you want to know why I learned Python? Because it was free on Google App
Engine. Why I learned Go? Free on Google. Why Java? Free on Google. So with
the tools I know, where do you think I'll go to try my next ideas? Yep.
Google. Now, let me try Swift on Bluemix, then Kotlin, then Rust, then DB2,
then Watson, then I'll go to build whatever new project I need on your
platform, with your tools. I won't go before, I'll go during and after I learn
them. But not on your platform if you won't let me try it.

So, tl;dr; open Bluemix for the whole world to try with an eternal free tier
without limits or expiration dates and I'll go with you to try all your new
toys. Then we'll help you conquer the world, again.

~~~
webwanderings
You're right, but it is not in IBM's business culture to give out free things
like Google and the rest of others (think Apple).

~~~
Entangled
That's exactly the wrong mentality in the business. How much does it cost to
allocate a million dockers for a million developers to play? A million
dollars? Take it as a huge advertisement billboard that will pay a million
fold when they tell their bosses how cool that platform is.

------
qntty
I get the feeling that he's using the negative publicity to get IBM to get
their act together.

~~~
narrowrail
Wrong. Buffet (Berkshire) has to disclose its positions. Berkshire still has
more than 50M shares. You can't just make shit up, and this crap being on HN
is getting tiring.

