Thread regarding IBM layoffs

@vib yep, for two reasons. They invest and innovate, and have a cost structure that allows them to be profitable in a commodity market. Blue has never done low margin successfully because it can't cover the 30% overhead of a bloated corporate structure.

@311h agree. But even for those, outside of z, there's little hw growth room. They're moving to cloud, and blue doesn't play there. The future is serverless containers running directly on a bare metal hypervisor, and nothing IBm is doing will address that, including red hat. I have yet to find a customer who actually likes those legacy apps - they tolerate them because right now maintenance is cheaper than replacement, but if that ever changes, they're gone in a cold minute. Relying on customers trapped into outdated inferior technology isn't exactly a growth strategy. The truth is that Ibm is a joke outside of the top 500 or so customers. And even those know the ELA game. IBm stuffs 'strategic initiative' revenue in them to reduce MLC cost even if the customer doesn't want it, knowing full well that it'll reverse later. But they don't report reversals to the street because that's just internal accounting. Madoff would be proud.

3ayn. You are absolutely correct with one big * attached. IBM gets 85-90% of their revenue from approx 10-15% of their customers. As such they have baked a HW / Services strategy that is Legacy 500 customers. What does that mean? It means IBM keeps System Z, Power 980, and Flash. Everything else can go. How will IBM deliver their strategy. Via the cloud, and as a service (very much like System z has done for the past 5 years). Why has IBM decided on this? Because this strategy takes very few people to deliver, and Legacy SW is very very sticky and most customers are satisfied that it works. (isn’t that the definition of legacy, something that works). Now just take the Systems model and roll it out to GBS, and TS&C. It’s the same idea in both of these divisions. Low margin services business goes the sell off, IP, spin off route as IBM can capture an equal or greater amount of profit from this plan. The high margin services business goes into “new” IBM and IBM pockets the high margins with very little “expense”. Look for this strategy to continue thru out 2019. I expect the CFO will have completed it by December

@ 3ayn "Decline in server sales for 2018"

In the cited article, all of the other companies INCREASED their server sales.

Anyone who thinks systems is a viable business needs to stop smoking whatever they're smoking. It's dead, and folks should get out now. Even the mainframe extortion racket will eventually end because no one under 30 wants to work on technology that's the career equivalent of an obuliette.

To add to this, and I doubt this is a surprise:

https://www.theregister.co.uk/2019/03/19/gartner_server_market_q4/

Decline in server sales for 2018

If you make a few assumptions based on page 23-46 of the annual report, you can back into a revenue number that IBM wants to run to. Systems will shrink by 1.5 billion (essentially the Legacy scale out of Power and Storage). IGF will shrink approx by 1/2 (essentially the OEM commercial business). GBS will shrink it’s application management business by 1/3 due to automation. TS&C will experience the largest shrink due to TSS going down by 1/2, and Infrastructure services going down by 1/3. Overall that boils down to 1.5 + .75 + 2.5 + 3.5 + 7.5 = 15.75. 79.5 - 15.75 = 63.75 or approx a 20% shrink. That’s where IBM wants to end up as the “new” IBM. The 15.75 may come back to IBM as IP revenue, and joint venture / spinoff revenue, but IBM views the 15.75 as legacy and low margin and as such it must go

This company is on a slow death path... another 10 to 15 years and it will be a 40B company.