I project by 2020 IBM will sell off whatever remains of its semiconductor and server businesses to be a software and services company.
You can almost see the 2020 headline now: IBM sells remaining hardware business to (fill in the blank). You can connect the dots to that headline pretty easily.
Big Blue announced plans to sell off its hard disk drive business to Hitachi in April 2001 for $2.05 billion. Even though it invented the hard drive, the business had become a commodity dominated by high-volume, low margin companies such as Seagate.
Three-and-a-half years later, it struck a deal to sell its desktop and notebook PC business to China's Lenovo for $1.75 billion. Despite the fact IBM's ThinkPad was an icon of the business traveler, its market was a loss leader for a company that lived on high margin servers, software, and services.
Today, Big Blue effectively said its Intel x86-based server line has become a commodity too and would be sold to Lenovo for $2.3 billion. What's left is a big, increasingly expensive semiconductor business primarily geared to make IBM's Power and proprietary server processors.
There's still plenty of life left in this old gal. The servers it makes power some of the world's most powerful systems used on Wall Street to run big banks and in US national labs to shepherd the country's nuclear stockpile and other highly sensitive jobs. These servers are not going to China -- or even another company -- in the immediate future.
But I predict they will go. Indeed, last year IBM lost to Amazon a $600 million deal to supply servers to the CIA. That's a sign big data farms of x86 servers are eating away at the advantages of IBM's in-house architectures.
Meanwhile, Moore's Law is getting more expensive with each turn of the crank and experts agree there are only perhaps three major turns of the crank left on that engine. But IBM still has a couple good punches left before it bows out of the hardware fight.
IBM's chip engineers are well down the path with partners such as Micron to 3D stacks of processors and memory that will give them a big boost in the next couple years. Late last year it also attracted Google to join a consortium rallying around its Power architecture in servers. I'm taking a show-me stance on the Google collaboration.
IBM is as well positioned as a company can be for such a dramatic step completely into software and services. It has already shared the secret sauce of its chip process with Globalfoundries and Samsung -- the most likely candidates to buy IBM's fabs someday. And it is on solid footing in the higher margin software and services markets with its new Watson analytics group that may someday be the main business we associate with IBM.
This maker of global business machines survived the death of typewriters. I suspect it could have a long life after 2020 when I expect to read the story about it existing hardware.
— Rick Merritt, Silicon Valley Bureau Chief, EE Times