

The decline and fall of IBM - rdudekul
http://www.cringely.com/2013/04/22/the-decline-fall-of-ibm

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forrestthewoods
When I look at their net income (~16 billion) and stock two words that do
_not_ come to mind are decline and fall.

[http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&c...](http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1371076142146&chddm=484449&chls=IntervalBasedLine&q=NYSE:IBM&ntsp=0&ei=cva4UYj9DY7-iQKnHA)

~~~
ajross
Their share of the tech industry (which they used to _utterly dominate_ at a
scale we hadn't seen since the days of Standard Oil) has been on an inexorable
downward path for almost three decades now.

Yes, they're still large and influential, and even "successful" in a limited
sense. But in context I don't think you can look at their recent history as
one of ascendance.

~~~
forrestthewoods
IBM is the world's 24th most profitable company (2011). Only 23 companies in
the entire world - not country but world - made more profit than IBM. Their
revenue and profit grows year over year. Any definition of the term "downward
path" that includes IBM is useless and provides no value.

[http://money.cnn.com/magazines/fortune/global500/2012/perfor...](http://money.cnn.com/magazines/fortune/global500/2012/performers/companies/profits/)

~~~
seanmcdirmid
Read Cringley's articles. IBM is great at marketing themselves and creating
the appearance of value, but I doubt that they can do that forever.

~~~
jussij
People have been writing off IBM for decades.

If you go back to the early nighties IBM had two or years in a row where it's
annual losses where bigger than some countries total income and their share
price fell under the $20 mark.

That was around the time with the clone PC where taking off and everyone was
predicted the end of IBM and _big iron_.

Move on 30 years and their share price is now back over $200.

~~~
seanmcdirmid
Let's just focus on today and Cringley's articles. If you can find something
wrong with his articles, where something isn't factual, please let me know.
But what IBM has been doing: cutting R&D for short term gains rather than long
term ones is going to have to consequences later down the line. Also, they are
betting big on India at the expense of tech talent in the states...I'm not
sure if this will pan out.

IBM has a hyper focus in optimizing their share price due to the talent they
acquired from PwC; I would say, its more like PwC acquired IBM due to the
cultural changes that followed (not that IBM was already dysfunctional, they
were all too easy to convince of this). But really, how long can this last?
Eventually they are expected to do great things to justify their valuation,
and all the news suggests that they have no capabilities at all to do such;
they just cut and cut!

~~~
jussij
Guess how they got out of trouble in the early 90s:

January 17, 1993 _The announcement by International Business Machines, whose
corporate world headquarters are in Armonk, that this year it was cutting
25,000 more jobs worldwide and reducing its budget for research, development
and engineering by $1 billion may signify that the company will have to
initiate the first layoffs in its history. Up to now the company has used
voluntary means like job buyouts and early retirement to eliminate jobs._

[http://www.nytimes.com/1993/01/17/nyregion/ibm-weighs-
possib...](http://www.nytimes.com/1993/01/17/nyregion/ibm-weighs-possibility-
of-job-layoffs.html?pagewanted=all&src=pm)

Seem familiar?

~~~
seanmcdirmid
I did my first IBM intern stint at Boca in 1995 (my second at Hawthorne in
2000). Many of the people laid off were hired back, then laid off again. It
was definitely a very messed up time (incidentally, OS/2 was moved from Boca
to Austin in early 1996 while I was there, many people moving but many laid
off). They didn't really get out of trouble with the 1993 lay offs.

IBM culture back then was pretty toxic, and there was a lot of dead weight to
lay off. It makes sense that many of those job could easily be moved to India,
yeh for them! But now...even the high-end tech people who worked there are
moving on to less toxic companies like Google. What's left? A bunch of
consultants and a huge insourcing operation in India?

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obtino
I used to be a developer with IBM and I was quite surprised that people
actually paid for some of their products. The majority of the software sales
were done as a part of 'packages' and 'solutions'. There was very little
innovation happening there. The only way any new 'solutions' were developed in
the business were through acquisitions.

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tytso
Cringely's server appears to be down. Here's a Google cache version:
[http://webcache.googleusercontent.com/search?q=cache:trvMH5p...](http://webcache.googleusercontent.com/search?q=cache:trvMH5pW7pQJ:www.cringely.com/2013/04/22/the-
decline-fall-of-ibm+&cd=1&hl=en&ct=clnk&gl=us)

~~~
rogerbinns
Cloudflare is supposed to solve that problem but instead serve a page saying
they can't. Not a positive endorsement of their service.

~~~
smoyer
I've seen this on at least 6 occasions (for different sites) in the last few
days. Is CloudFlare itself overloaded?

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wtbob
IBM sells itself to customers as an IT company, but its true core competency
is selling itself to customers who think it's an IT company. There are some
very smart people there, but for the most part they mistakenly thought they
were going to work for an IT company, or they are in the part which is just
marketing (IBM Research comes out with some truly amazing stuff, which is
basically just marketing to convince companies to buy services from IBM).

~~~
gallinaponedora
Exactly. And there's nothing wrong with marketing, as long as the money comes
along, which is all that "right" is: money. Some of these techies who write
blogs are as smart as they are shortsighted.

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gallinaponedora
website is down, the sweet irony... Now haven´t seen the opinion, I'm sure I
have read the same already (over and over). IBM is not declining. To be
magnanimous, I´d say it is only declining for narrow minded tech people who
can see past their area of expertise. They are not investing, they are not
innovating, they are cutting jobs in the US, bla bla bla. Well, they've been
compounding at over 10% for the investor for the last 10 years, sure enough
it's just a lucky strike or a mirage, right? _yawn_

~~~
krmmalik
Agreed. I can't reach the article as the site is down, so my comment may be
out of context, but i do agree they're doing something right. I haven't been
following their stock price, but i do take the odd glance at their movements.

I was in talks with an employee at a blue-chip here in the UK, about assisting
them with their digital strategy. They clearly needed alot of help.
Unfortunately a major player swooped in - fast forward 12 months - they've
helped them turn things around and now the client is doing great.

Turns out the major player that swooped in was IBM. Who knew IBM was actively
doing digital marketing. I mean they're an IT company, right? I.e. networks,
servers, software.

I think the reality is, they're a consulting company for big business that
will help their clients get anything done and it only has to be remotely
technical.

So i think they'll be around for a long time to come.

~~~
seanmcdirmid
Right! They are mostly a consulting company now (much like PwC consulting
was...), and we should judge them as such. As I'm interested in tech R&D, that
makes them completely uninteresting to me, and I don't think they should be
valued higher than my current employer (Microsoft), but the market works in
mysterious ways.

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mililani
IBM was my former employer. This has been going on for a long time in the U.S.
All one needs to do is go to this site:

[http://www.endicottalliance.org/](http://www.endicottalliance.org/)

And read the forums.

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ChuckMcM
Since his sight seems to be down I'm left commenting on the headline [1](sigh)
but my guess is that the arguments are the same as they are for the 'decline
and fall of Microsoft' or any other company where their relative standing in a
market that changed dramatically over their life, also changed the way in
which folks perceived them.

Not to get all Grey Beard on y'all but back in the day IBM was the big
behemoth and startups like Sun Microsystems or Microsoft even were the
challengers. IBM was created when computers filled rooms, businesses ran on
paper processes, and "uploading your database" consisted of tens or hundreds
of young women typing on mechanical contraptions called "card punches." _And
they are still here and still making money._

And that last bit is what amazes me. Look at the 'big names' when they
started, Rand, Sperry, Univac, Cray, Control Data, Digital Equipment
Corporation, Etc. They are on track to become the first 100 year old
"computer" company. (depending on when you think of it as becoming one) and
they continue to dominate in patents issued.

What IBM has created is a very _durable_ technology corporation, which is up
there with Corning Glass and DOW Chemical. Somehow I suspect they will prove
Cringley wrong.

[1] Ok so I read the cached copy and as I expected Cringely is extrapolating
out from a few point changes into some apocalyptic demise. Previous columnists
in Datamation predicted that once IBM's monopoly over peripherals was broken
(1977?) they were doomed as well. Didn't happen of course.

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gavinh
Ah, I was waiting for Cringely's annual IBM-doom-and-gloom post.

~~~
seanmcdirmid
I really don't know why he bothers anymore. IBM is just a consulting company
now that makes money but has little to do with actual technological
innovation. Its just not interesting anymore as they are irrelevant.

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elaineo
"Decline and fall" because IBM missed one earnings target after 4 years of
positive earnings surprises (or more, I didn't look any farther back than
2009). Seems a bit preemptive.

The author's chief complaint seems to be that the management is incompetent,
but IBM has been known for excellent financial management for the past 2
decades, and the CEOs have not changed recently.

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speeder
A 101 processor machine with 4 cores each and 5.5ghz that is actually sold and
profitable does not sound like something a fallen company can pull...

It sounds like a machine a business would use too, you know, like someone
named International Business Machines might build and sell.

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kragen
I think the first time I saw Cringely predict the death of IBM, it was in
Accidental Empires, where he was confident that their mainframe business, and
therefore their entire company, would collapse at the beginning of 2000
because of the Y2K bug.

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Sven7
Elephants can't dance.

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babesh
This is actually old news. IBM has been in decline for a LONG time.

~~~
happycube
And Apple Is Doomed(tm)

~~~
babesh
Interned there a long time ago and built software for an application they
bought. From the internal perspective there was a lot of big company politics
and mail it in behavior. From an external perspective they buy companies in
growing markets and milk them but don't really improve them. The complaint is
that they are not pushing the boundaries not that they don't make money. The
way I am evaluating them is whether I think that are bringing something new
and valuable to the world. Celebrating them is like celebrating record profits
from Exxon. Its kind of sad.

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sinnerswing
decline and fall of IBM? IBM transformed itself from a manufacturing company
to one of the largest services company in the world. HP, Dell, everyone is
getting out of the hardware business (low margin, etc.) and following IBM's
lead (HP bought EDS and is trying to get rid of their hardware business. Dell
bought Perot Systems 4 years ago and is in the process of going private so it
can transform itself into a mini-IBM).

IBM's return on invested capital grew from 14.92 (2003) to 31.39 (2012).

HP from 9.98 (2006) ROIC to 14.97 (2012)

DELL from 43.33 (2003) to 11.32 (2012)

GOOG from 30.56 (2003) to 15.29 (2012) <=== going into the hardware business
(MOTOROLA) is a bad idea for GOOG

MSFT from 17.66 (2003) to 22.66 (2012)

AAPL from 1.55 (2003) to 42.84 (2012)

If you noticed, IBM's ROIC is higher than other tech companies except Apple.

~~~
ellicottvilleny
And now IBM is headed back into the financial toilet again. Consulting and
Services are going to keep IBM around, and the name will last another 100+
years, but their stock price isn't going anywhere but down.

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camus
IBM is doing quite well. They are not falling at all. Yes they are not what
they used to be , but they dont need to look like the new hotness to survive.
IBM provides very high quality services for medium and big businesses. I'm not
sure i get your point , just look at the numbers , they are quite good.

~~~
jetti
As somebody who makes a living writing code that integrates with an IBM
product in the BI space, I absolutely love IBM. They gobble up companies to
increase their portfolio and do little to improve them but end up crapping it
up. It leaves a lot of market space for a company to come in and write
software that will make working with their product(s) easy and intuitive.

