Good analysis Rick...I agree that IBM wil get rid of teh hardware business eventually...IBM will become IBM Watson and rule software world thru Artificial Inteliggence...doesn't matter who buys the silicon fabs...Kris
Rick! I think this depends if Glofo can make enough money. Right now they pretty much spend all of what they make. Soon ATIC (at al) may want to see some profit and stop pumping cash into Glofo. My guess is that any of Common Platform Alliance are good candiates first. But there may be also a surprise company.
Intersting opinion. If you think about IBM's value at the high end, it is the fact they they control the hardware and the software. Companies know that if they find a problem somewhere in the system, that they make one call..........It is one of the reasons why IBM invests so much in accessing all of the RedHat software at a level where they can make changes if needed and of course use their own processors.....this group prints money as the customer based greatly values the piece of mind that IBM delivers around these comprehensive platforms. Going to a software-only play reduces the differentiation to others.....So I think they will continue to do both.
Let's chat in 6 years (maybe earlier if I am wrong)!
@fergie, great observation. I have always wondered why IBM has been hanging onto its semiconductor business as long as it has. Its microelectronics business is really about taking control over its own future,isn't it? Without the advancement of hardware, it's harder to influence the advancement of software after all...
IBM is well known for its research, development and innovation as they are for mass production. These are the times when carrying out hardware business is not that profitable and also they have been holding the legacy from long. May be sme new players can take it forward and bring in more revolution.
With growing in Cloud business, i can also see IBM focusing in it. But, Amazon and others have really gained massively in Cloud computing. How would IBM compete with Amazon and others currently leading in the Cloud?
No surprise IBM sold off the drive business. In fact, the surprise is that it didn't happen earlier. I've been watching consolidation in the drive industry for decades. Does anyone remember Micropolis, or Quantum, or Conner Peripherals, or CDC, or... Consolidation was inevitable as prices dropped, margin shrank, and you needed market share to survive.
Hardware inevitably becomes a fungible commodity, with commodity pricing, and you can't make money on it unless you sell enormous volumes.
The user isn't buying hardware. They are buying a tool to do work, and that tool includes hardware and software, designed and integrated for a purpose. The value to the user is what they can do with the tool, and not what the tool is made out of.
I don't see IBM entirely exiting the hardware business, but they began diversifying into software and services when the mainframe market was still thriving, and for good reason.
IBM will stay in hardware that is not a commodity and can command a decent price, but IBM has always sold fundamentally sold systems, not components.
@rick merrit: Once there were 30+ drive makers. Now there are about four. It's the way of tech I think.
Yep. Hardware steadily becomes commoditized, and it mostly doesn't matter whose name is on the label. The Backblaze folks recently posted a blog entry about the drives they buy for their cloud services, and the answers were Seagate and WD, with Hitachi third and a few others with miniscule usage. According to their stats, Hitachi drives are the most reliable, but not enough so to make them pay the higher price Hitachi wants. (And Hitachi apparently just sold off it's drive business, with part going to WD and part to Toshiba.) I remember when WD made drive controllers, not complete drives.
I used to read one of the trade papers that tracked OEM manufacturers, and watched the progress toward "last men standing" in the OEM drive market. Some I regretted (like when CDC sold it's OEM drive operations to Seqagate, and for a while I kept a table of which Seagate models were former CDC. CDC drives were built like tanks and just ran.) Some I said "Good riddance to bad rubbish", like Tulin, whose drives bred bad blocks like flies, and I suspected would fail before installation.
But it's the way of tech in all areas. You constantly cut costs and sell cheaper, or you get acquired or go belly up.
WD (including Hitachi Global Storage, and suppliers such as ReadRite and Komag)
Toshiba/Fujitsu (IIRC ~10% market share)
Plus possibly a company in China making a negligable amount of HDD's.
At least the HDD companies have some good ideas, such as targeted drives (e.g. WD Black=performance, Blue-mainstream, Red=NAS, Green=power saving) and hybrid drives (Seagate's with 8G NAND cache, WD has some with full SSD and HDD).
The HDD industry does seem to have a pretty clear path to substantial density increases with HAMR and patterned media; I'm not sure the path is so clear for flash memory. It's also interesting that there are close ties between the some of the HDD & flash companies (e.g. Seagate & Samsung, Toshiba)
The history of IBM is littered with failed oportunities. IBM is now and has ever been a Marketing company, controlled by salesmen, who get paid for maintaining "customer relationships". A couple of examples: Microsoft would not exist if IBM had not let itself be wrong-footed and outsmarted by Bill Gates. Oracle would not exist if IBM had not sat on the Relational Model for three years, fearing to impact their customers use of IBM's "IMS" data management, software, a technical disgrace. Intel would not exist if IBM did not cop to their 8080 architecture, inferior to their own IBM 360. and then provide them a 10 million dollar loan when they were about to go under. ARM would not exist if IBM had properly fostered and promoted and opened their own RISC architecture. IBM invented all this technoloty, and then let it slip through their fingers because of their "Marketing" vision. Even now, if the dim-wits in IBM's White Plains Industry Marketing Department cannot forsee a 15% net margin, they dump the activity. The basic error is to suppose that if you ask your customers "what they want", and then give it to them, you will be successful. As everybody else now must understand (it's a trivial fact}, "customers" do not know what they want. IBM still doesn't understand this.
40+ year IBM veteran. Much of what 'sofianitz' says is true about IBM Marketing. But Marketing is -not- in charge at IBM. Finance is. Financial controls at IBM are staggeringly HUGE. Half the company is employed checking the other half--and each other. It is correct, as 'sofianitz' says, that a project must overcome a daunting set of financial hurdles (and watering down) to see the light of day.
But those hurdles are not put in place by Marketing. The financial controls process that is enforced by Finance exhaust Development, Marketing, Sales--everyone--and take so long and require such effort, as to make delivery of products and services a 'market-missing' certainty. The Watson project is a great example. Why would it take THREE YEARS from the "Jeopardy" extravaganza to bring actual products to the market? And it's not really done to this day.
Financial technocrats are in charge at IBM. Not Technologists or Marketers. Technologists and Marketers are interchangable parts at IBM who are either "surplused" in early or mid-career, or, exhausted by the process, coast out of the company to retirement.
Only Finance people would think that 'customers know what they want...'
"The history of IBM is littered with failed oportunities."
This may be true (for IBM and many other companies as well). But "hindsight is 20/20" as they say, and the company has not exactly been unsuccessful in the meantime. If you compare a long-term chart of IBM's stock performance with that of AMD, for example, I know which one I would rather bet on.
"Considering only their "stock performance". Heading for the "killing field"."
Not sure what this is supposed to mean. But a company's stock performance is - ultimately - a reflection of the company's earnings and business performance over time. IBM has proven itself to be successful despite having a history "littered with failed opportunities." This of course doesn't guarantee anything about the future. But a long-term track record must count for something.
It means, quite simply that IBM stifles innovation and vision, is so hide-bound that it unwilling to take a risk, and that their long-term prospects are hopeless. But just go back and look at your "stock performance charts", and don't consider reality at all. That's what IBM does. IBM is failing, a fact that is apparent to anybody who doesn't have their nose buried in the "stock performance charts".
IBM hasn't failed in anything, it doesn't want to play in low profit business, For example IBM hasn't been investing in wafer capacity at its Leading FAb, IBM used to have surplus wafer capacity after it was done for chips for its Servers, If you remember few years ago IBM made game processors for all 3 major brands, Sony, Xbox & Wii, but slowly it decided that it doesn't want to play in this business anymore and did not invest in capacity at advanced nodes, and gave this business to other Foundries, and finally it gave up Design for game processor as well and now AMD is doing it,
Years ago, System & tech group was on its own and had a Exec with Hardware background and had bigger share of IBM revenue. BUt in last few years, its is merged under Software & systems and now headed by a non-hardware Exec.
It is telling us how Hardware is going to play less & less role in overall IBM and it is by choice of playing in Higher margin,but not because it can't make good semiconductors or servers, IBM can open a FAB in China too, but choose not too, doesn't want to play in commodity business,