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Monday, October 17, 2011

IBM Stock Drop an Indicator of the future?

Investors are extremely concerned about IBM's current quarter results.  See the Rueters article titled: "IBM's Q3 disappoints, stock drops"

IMHO this is a signal of IBM's decline.  Unless some radical changes to refocus the computer and software giant on real solutions to real business problems and abandonment of its absurd and failed technological solutions in search of a problem will be its down fall. 

IMHO IBM's decline began with Lou Gerstner who reinvented IBM in the image of Nabisco.  Sam Palmisano is a Gerstner clone with a heavy focus on technical consulting.  Under the leadership of these two, IBM dumped its printer business, its printer business and ripped the guts out of its storage business. It has basically eliminated its AS/400 aka iSeries aka System i business is moving its formerly profitable zOS business to Linux and refocused its power systems group on Linux. 

Under Steve Mills "leadership" [???????] WebSphere and IBM's SOA initiatives, application servers, commerce server, and many other products have been virtually driven out of the market place by free open source software. 

The biggest issue for IBM today is Oracle after its acquisition of Sun Microsystems, Inc.  With the acquisition of Sun, Oracle now has a complete and total turn key suite of solutions including all required hardware, middleware, and application software for virtually every business requirement you can imagine.  The Sun acquisition rounded out a total package of its own software, Peoplesoft, and JD Edwards. 

Oracle was a major IBM partner who helped sustain IBM Power Systems revenue.  Now Oracle will be selling its own hardware with extremely attractive package pricing. 

IBM's own strategic manuevers like the move to LINUX away from proprietary operating systems will hurt IBM significantly. 

While IBM remains a huge player in the computer systems market, continued drop in stock prices will open up the opportunity for a hostile take over.  Perhaps Steve Ballmer will realize his dreams, or perhaps Oracle's Larry Ellison will make a bid for IBM. 

Gerstner's gutting of IBM's field organization and virtual elimination of IBM's industry specialty groups who used to drive software and hardware development will ultimately weaken IBM severely.

IBM has loads of wonderfully brilliant computer scientists, but unfortunately, these guys as brilliant as they are have no clue what modern business wants or more importantly needs.  You have research scientists going wild with some great ideas that are totally unnecessary for modern business.

Note that all of IBM's SOA (service oriented architecture) support software has virtually tanked and for the most part been withdrawn.  IBM's initiatives in Java J2EE has been virtually abandoned along with many other "strategic initiatives" that were technically based. 

In addition to Oracle as a huge competitor, Microsoft remains an aggressive competitor as does HP.  In addition to commercial competitors, open source is making a huge impact on IBM revenue. 

Open Source now covers a broad range of solutions from operating systems (LINUX) to middleware (the Apache Software Foundation's Tomcat and Apache web server), and now a huge portfolio of application software from accounting to ERP and everything else. Open source has basically driven IBM's WebSphere division out of the market.

I think IBM has a long ways to go, but if this is a trend, they won't last forever.  Watch the competitors. Treat IBM just like any other vendor and do not give them any special consideration.  IBM has little or no software or hardware you cannot buy from competitors.  Go for best of breed hardware and software and get rid of any brand based allegiance.

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