IBM is a much different company today than it was a decade ago. Thanks to a multi-year
"creative destruction process," the shedding of mature declining businesses, and the
plowing of resources to emerging high growth sectors like the "hybrid" multi-cloud
market.
Let's not forget all the RAs in that "creative destruction".
https://www.ibtimes.com/red-hat-new-ibm-3479562
Do the math Dumping Scaleout will reduce revenue by approx 4-5 billion dollars, but headcount out of “infrastructure” will be reduced by approx 2/3’s. NOTE the 4-5 billion dollars are “empty calories according to Ginni, as profit margins on scaleout are negligible. This is a no brainer as it’s self funding and rightsizes Hybrid IBM. Why IBM management can’t execute on this given their rightsizing strategy just shows the lack of leadership / resistance to change within IBM, or the complete lack of value within the scaleout group. Either way, IBM doesn’t need to be in this business as it’s draining “new IBM”
https://www.itjungle.com/2022/03/07/the-low-down-on-ibms-power-systems-sales/
Actually IBM just showed what they plan to do. Enterprise power and Z16 were just moved into a new manufacturing center in POK. That means scale out is going away
https://www.reliableplant.com/Read/24006/IBM-manufacturing-facility-NY
Kyndryl buying the “infrastructure” division of IBM is essentially buying an annuity. Good profit margin but zero growth. IBM has a very steady profit margin on that part of the business (enterprise), and Kyndryl would have to have a plan to use the “enterprise” marketing to catalyze the rest of their business. Is it possible? Of course, but you better have a plan to catalyze growth in the non-enterprise part of the business
NOPE IBM has the right not to sell depending on market conditions
As previously stated, IBM is retaining 19.9 percent of the shares of Kyndryl common stock, with the intention of exchanging those shares for IBM debt during the 12-month period following the distribution, subject to market considerations.
With IBM currently owning 20% of Kyndryl
Yes but aren't we obligated to sell all that (at billions loss) this year?
Try turning the $34b RH pig into a princess and dump it off.
With IBM currently owning 20% of Kyndryl, I suspect the partnership trumps suing and both sides would have an incentive to strengthen that relationship
Should IBM just exit the capital data centers and networking infrastructure/cloud hosting business and just contract Kyndryl to do that for them?
The previous big spinoff that had ongoing business deals (Globalfoundries) ended up with both parties suing each other.
@mga So let’s take your idea and move to the next logical step. Should IBM just exit the capital data centers and networking infrastructure/cloud hosting business and just contract Kyndryl to do that for them? Essentially IBM would become an all in customer for Kyndryls services allowing IBM to concentrate on SW, Consulting, and AI. If yes, it’s just a partnership agreement away from IBM exiting HW manufacturing and servicing, and just contracting that piece of the business out. IBM’s enterprise customers (think Z and large power and storage) may insist on IBM keeping the Enterprise business, but there certainly would be little push back for anything else. Offloading the “infrastructure” division to Kyndryl (an infrastructure business) dove tails nicely while keeping IBM’s enterprise customers happy and IBM more focused on where IBM wants to take “new IBM”
Destruction yes, creative no
"Even Ginni wasn’t that incompetent to spend a fortune without a plan"
Ginni plowed huge amounts of money into a succession of Moon Shot grand plans, strategic initiatives, etc., all while sucking massive amounts of capital out of the business in the form of dividends and stock buybacks at a time when any reasonably informed person could see that competing in the Cloud would require investing that capital in data centers and network connections.
So yeah, I do believe Ginni could have thrown $34B at RH in a desperate, last ditch attempt to salvage her reputation.
Really glad to have been part of that "creative destruction process" by being RA'd to make room for the new hip crowd. Despite the fact that I had glowing reviews for years and years I'm really happy to have taken one up the a-s so that IBM could thrive. Great job, team.
But unfortunately IBM Is the new Red Hat.
Why do you think IBM spent 34 billion? That was almost 50% of annual revenue. Even Ginni wasn’t that incompetent to spend a fortune without a plan