RE: The Future of IBM ..

It would be very telling to see the percentage profit each segment pulls in.

-----Original Message-----
From: midrange-l-bounces@xxxxxxxxxxxx [mailto:midrange-l-bounces@xxxxxxxxxxxx] On Behalf Of Bryce Martin
Sent: Friday, June 28, 2013 12:14 PM
To: Midrange Systems Technical Discussion
Subject: RE: The Future of IBM ..

Yet they still pull a 30% profit margin. I know it looks like nothing compared to 89% for Software, but who would divest a business unit making a 30% margin? Everyone talks about the failures but what about their wins? They aren't making money from nothing.

Thank You
Bryce Martin
National Ticket Company
570-672-2900 ext. 226

-----Original Message-----
From: midrange-l-bounces@xxxxxxxxxxxx [mailto:midrange-l-bounces@xxxxxxxxxxxx] On Behalf Of Nathan Andelin
Sent: Friday, June 28, 2013 1:33 PM
To: Midrange Systems Technical Discussion
Subject: Re: The Future of IBM ..

It started the moment they began divesting of real estate and various
divisions that produce 'stuff' instead focusing on groups that produce
'billable hours'.

The irony is that of IBM's four main business units, the consulting arm (Global Business Services) is the LEAST profitable and a drain on earnings per share (comparatively).

Profit Margins From the 2012 Annual Report:

Global Business Services 30%.
Global Technology Services 36%.
Systems & Technology 39%.
Software 89%.

The profitability of IBM's software is quite remarkable. I bet the profit margins on IBM i are above 90% due to its maturity, stability, and adaptability.

Another irony is that the business unit that manages data centers (Global Technology Services), which is also the one doing the most off-shoring and out-sourcing, is the one that is chalking up the most high-profile failures. The Disney account is a good example. Disney outsourced their IT operations to IBM. IBM off-shored to India. When the contract came up for renewal, Disney decided to deal directly with HLC Technologies out of India, rather than IBM. That contract was valued at something like $200 million.

Disney of course is just one example. There are dozens of cases where Global Technology Services has taken a hit. Amazon beat IBM out of a CIA contract valued at $600 million. IBM complained, but to no avail. IBM lost a bid for a new ERP system for the state of West Virginia valued a over $100 million. IBM protested when it was awarded to CGI (out of Canada), but to no avail. West Virginia is now in the process of retiring their IBM mainframes.

If IBM and Lenovo were able to come to terms on the sale of IBM's Intel Server business, that would be a step in the right direction. That would reduce the internal competition between IBM's Intel platforms and Power platforms.

It would be ideal if IBM divested most of the Global Services business and returned to its roots of Systems and Software, which are the most profitable. That would really unshackle IBM i on Power.

-Nathan

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