
IBM Plunges as CEO Abandons 2015 Earnings Forecast - orin_hanner
http://www.bloomberg.com/news/2014-10-20/ibm-abandons-2015-earnings-goal-as-rometty-divests-assets-1-.html
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krschultz
I read Cringely's recent book about IBM and it sure makes the case that IBM is
in a world of trouble. I can't say whether or not he's right, but what good
software has come out of IBM recently? Eventually a tech company needs to be
good at tech, no matter how great your sales guys and brand reputation.

~~~
parasubvert
Keep in mind that IBM is the 3rd largest software company in the world, behind
Oracle and Microsoft, with around $28 billion in annual revenue JUST from
software (out of their total $100 billion). Revenue has been mostly flat for
the past 7 years, though they've been squeezing out more profitability. That's
a big ship to turn around.

That said there are plenty of examples of IBM doing new things, just the
question is whether it's enough...

\- IBM BlueMix, and IBM is actively contributing to Cloud Foundry
(particularly the new Diego runtime):
[http://www-01.ibm.com/software/bluemix/](http://www-01.ibm.com/software/bluemix/)

\- IBM Watson analytics is also fairly impressive:
[http://www.ibm.com/analytics/us/en/index.html](http://www.ibm.com/analytics/us/en/index.html)

\- The Jazz.net products for agile requirements and development tracking are
fairly modern and has a happy customer base (replacing the older crap Rational
ClearCase stuff): [https://jazz.net](https://jazz.net)

\- They've also acquired some good software, such as Urban Code, for automated
app deployment:
[http://www-03.ibm.com/software/products/en/ucdep](http://www-03.ibm.com/software/products/en/ucdep)

Pretty much the entire software sales force is pushing cloud/devops, mobile,
and analytics, which are the bulk of their new license streams. Their
maintenance stream is still the large annuity from the mass of WebSphere,
Tivoli, DB2, Lotus, and mainframe legacy deployed out there over the past 30+
years...

~~~
raverbashing
ClearCase is the reason why I'll never pay one cent to IBM in software if I
can.

That's what they sell, overpriced crap sold in a golf course.

~~~
trentnelson
ClearCase came from the Rational acquisition, which came from an Atria
acquisition. It dates back to the early 90s.

~~~
raverbashing
I know that, but it doesn't matter.

Your name tag, your responsibility. And from what I hear other IBM tools are
crap as well (like Tivoli)

Want to see an exemplar acquisition? Visio. They were so Office like, MS
almost "PnP" it
[http://en.wikipedia.org/wiki/Microsoft_Visio](http://en.wikipedia.org/wiki/Microsoft_Visio)

~~~
MichaelGG
Visio? That terrible UI that makes drawing even a simple flowchart or network
diagram a total pain in the ass? I have not seen 2013 but earlier versions
were not MS-ified as far as user experience. It always stuck out. In fact, I
use Word's drawing editor for some diagrams because it's easier than Visio. It
was not PnP and took them a few versions to even make it look like it might
possibly been made by Office.

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ChuckMcM
I find it kind of odd, but IBM pretty much wrote the book on building reliable
data center services. I've met the CEO/GM of SoftLayer (Lance Crosby) and he
is a smart guy so I'm guessing he will have a lot to add to the bottom line
going forward. But it did not seem like Lance was working _with_ IBM so much
as he was working _for_ IBM, and that strikes me as something that will be
corrected once the integration is better.

VPS hosting is a commodity business, and Digital Ocean is driving every penny
out of it (they are sort of the Dell of VPS it seems). But the "cloud" is a
services and consulting play I believe. A couple of the things I learned at
Google was that uniform server design didn't work well, but integrated compute
and services did. A Gmail cluster was a thing to behold. The challenge is that
if you're building petabyte and exabyte scale infrastructure you can't have
your "storage cluster" over here, and your "compute cluster" over there, ever
move a petabyte of data over a 10GB link? It takes forever. So your goal has
to be to build an API/Services rich environment in a high bandwidth fabric but
to ruthlessly use locality as a "feature" in your scheduling.

With Softlayer's gear, and IBMs resources that is really doable. Remember that
IBM is still going to have 12 - 13 billion in free cash flow. So they have the
horses to build infrastructure just as fast as Google does (which calls out
that expense in their quarterly reports), but IBM also needs the services
infrastructure play which is something they are really really good at. I'm not
counting them out until the decide to divest themselves of SoftLayer :-)

~~~
MichaelGG
What do you mean by uniform server design not working out? You mean without
locality planning?

~~~
ChuckMcM
The big challenge is storage. If you don't treat storage as a first class
service and instead make it part of the standard 'atom' your storage
requirements grow faster than your compute requirements. And while you get
some relief by replacing the storage component with denser ones, you always
seem to end up with high priced and under employed compute capabilities going
to waste while it provides access to data on some spinning rust.

I was an advocate of variation in the form of 'storage focused' and 'compute
focused' atoms but at the time the mantra was 'identical blocks.' Never got
much traction on that. The trick is of course mixing nodes the the mesh of
services, that aspect of it really benefits from a colloidal solution of
resource nodes :-)

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pjc50
See also [http://ftalphaville.ft.com/2014/10/20/2013702/the-sage-
gets-...](http://ftalphaville.ft.com/2014/10/20/2013702/the-sage-gets-what-he-
wants-at-ibm/)

Claiming that IBM is planning more stock buyback in the future, and is
therefore not unhappy about the lowered price.

~~~
vo1aQXJ3
and that is why Warren Buffet is not too worried either. because the share
price has come down IBM will buy more of its own shares. Therefore Buffet will
own a bigger part of the company with out actually buying more shares. almost
a win-win!!! (except for the people who are going to loose their jobs as a
result of this, but who cares about them?)

~~~
nilsimsa
If you cared about you job at IBM, you would have long left. They have been
downsizing for ages.

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brudgers
IBM is dead!

Again.

Again?

Again. Last time was a bit over two decades ago. They dumped their PC
business. They mostly abandoned OS/2 development. Because they were
unprofitable.

Wall street freaked out. Linkbait headlines sell newspapers _and_ stock
picking advice. Look who IBM linked up with: A sovereign investment fund
backed by petroleum reserves. If you can't spot the bumpkin at the table...

~~~
cgusto
Agreed. The stock dropped around 7.5%. Although significant, it is not
"tumbling".

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mmastrac
Financial headlines have been really clickbait-y forever. Would anyone click
if the headline was "IBM loses two months of gains" rather than "plunges"?.

~~~
throwaway5752
It looks like a 3 year low to me (as IBM has been trading sideways for years)
personally I think the headline is accurate (down 7% for a stock with a float,
institutional base, and capitalization of IBM is a huge amount of paper
losses).

Abandoning the 2015 forecast is probably the bigger news vs any kind of daily
price fluctuations, but the stock fluctuation underscores that this is
somewhat big deal.

Sorry if you hold IBM. Oil stocks have been painful for me, I wish I was doing
as well as IBM is doing.

~~~
brudgers
Statistically, every three year period contains a three year low.

~~~
gjm11
Nope. Every three year period contains a low-within-that-period but that's not
what "three-year low" means.

Consider, e.g., an asset whose price is just going steadily upwards. Every
3-year period has a low point -- the start of the period -- but there is no
point at which you can say "The price of this asset is now at a 3-year low".

~~~
brudgers
By that reasoning, IBM is not at a 3 year low since it is up from earlier
today. The concept remains meaningless. That's why it is used by those
speaking to dumb money.

~~~
throwaway5752
Can I ask if you consider yourself smart money, then? Because in almost 15
years of investing, fundamental research, and technical analysis [edit: and
associated community participation, consumption of research products, and
reading investment literature and publications] I have not seen anyone take
issue with calling a 3-year low on a stock on the basis of an intraday low.
It's a 3 year low. I didn't say that was particularly important, but it's true
by any reasonable definition of the term (which is a common one). It might be
important on the basis of the volume, as it crossed a technical level that
it's held for quite a while and may be forming a downtrend, which is
frequently interpreted as a sign of institutional selling.

edit: FYI, IBM hasn't traded below 170 since Oct 4, 2011. It hasn't closed
below 170 since Sep 23, 2011.

~~~
brudgers
Smart money? Me? No fucking way.

The few times in my life I've made money from an "I've got a deal for you
phone call" the person on the other end wasn't making money from a cut of my
check. Instead, I was making the deal bigger.

Stock market literature is a respectable pony system. The Dow goes up because
they drop losers and add winners. The index funds were that were holding AIG
didn't get Kraft Foods shares and their investors lost money. I feel I'm just
smart enough to recognize that intraday is dead money for the quants in HFT.

~~~
throwaway5752
Look, we actually agree on most things. But smart money also knows there's a
durable advantage in patience, time frame, and liquidity. Something that the
individual can general have an advantage against funds in (given substantial
knowledge in fundamental valuation techniques and market dynamics - no small
order). Describing it as a 3 year low is completely accurate. Saying there's a
lot of dumb money in retail is, too. I respect your not playing a game that is
set up against you.

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pcurve
Robert Cringely is busy writing is follow up article now.

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curiousDog
Is the cloud a low margin business in general? Looks like very few companies
are prepped to handle that (read AMZN/GOOG). I'm not sure if I should be
holding onto my MSFT stock anymore though :). Seems like just a matter of
time.

~~~
sz4kerto
MSFT is currently way bigger in the cloud business than GOOG (it's a lot
behind AMZN though), so I'm not sure why you think that AMZN/GOOG is going to
handle this better. Azure has a very strong momentum now and looking at how
quickly that department of MSFT adapts, this is going to continue I think
(they are really trying to accomodate all platforms, etc.)

~~~
xorcist
There is some truth to that Microsoft is less prepared for the slimmer margins
than Google and Amazon is, who are veterans of this space.

Their cloud services has higher overhead simply because they stick with
Microsoft tech for obvious reasons.

Microsoft also has more focus on their sales force which may not be such a
good idea when/if Office dies. Time will tell.

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vo1aQXJ3
what a surprise... the question was not if... but when. and the answer might
well be: today.

~~~
adwf
Yep, they've been steadily ditching parts of their business for years now.
This is just the short-sighted thinking coming home to roost. IBM R&D just
isn't what it used to be and a company that isn't making new things, isn't
going anywhere.

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gress
Apple can eventually just buy them and rename them, Apple Enterprise Services.

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autism_hurts
IBM is a professional services/consulting company. Not software or hardware or
technology.

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thegenius
In an interview today, Ginni Rometty sounded like a TechCrunch Disrupt
participant on HBO's Silicon Valley. "We are reorganizing this company around
analytics, around cloud, around _social, local, mobile_ " I can't believe she
actually said SoLoMo.

Then later in the same interview: "Clients asking for more flexibility in our
software to deploy for new workloads — _social, local, mobile_."

If anyone else caught her in Fortune's Most Powerful Women Summit just a few
weeks ago (available on youtube), she appears anxious as hell with Warren
Buffett in the crowd watching her. No wonder with a 0.02 EPS to report and a
last minute ditching of the 2015 roadmap.

[http://blogs.barrons.com/techtraderdaily/2014/10/20/ibm-
ceo-...](http://blogs.barrons.com/techtraderdaily/2014/10/20/ibm-ceo-rometty-
hints-to-cnbc-about-layoffs-we-are-playing-to-win/)

[https://www.youtube.com/watch?v=9bixGVxcTLc](https://www.youtube.com/watch?v=9bixGVxcTLc)

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andy_ppp
I would be wary of posting what I think of IBMs business model here for fear
of being sued...

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dynsrv
IBM is financial engineering company. Ginni visited my country twice because
she considered important market here. But as you can see, IBM is on the path
of declining. I think Apple or Amazon will help IBM in the future.

