CNBC This Morning, As I Had Done Yesterday, Pilloried Punch-Drunk IBM.

Anura Guruge, June 8, 2013.


Anura Guruge

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It was funny to hear the CNBC morning crew going after IBM. They said it was NOT a technology company, but a ‘Share Buyback‘ company. Of course they were right. They just laughed at IBM, its products, its plans and its management. They said that analysts on the conference call had been downright rude to the IBM management. They deserve that.

Right now I feel for the shareholders. Get out of IBM. By all means get in when it is down to $150 — as it is bound to over the next 6 months.

The company right now is screwed.


IBM’s now defunct networking gear. It was absolutely astounding that IBM, with all of its expertise and resources, could get this SO WRONG. But they did. In the end they had to bow out of networking a multibillion/year field. Cisco was the beneficiary.

When they say they are making double digit gains in ‘cloud’, ‘security’, ‘analytics’ etc. ALL that means is that their prior share was so low that even a small increase represents a double digit percentage gain.

Reminded me of a ‘famous’ meeting I had with IBM senior management c. 1996. I had been very critical, quite rightly as it proved to be, of IBM’s nWays ATM Broadband Switches. IBM had spent BILLIONS having them developed at their labs in La Gaude (France) and they were garbage. I was very vocal of that and IBM did NOT like it.

So they called me in for a meeting in Raleigh. One of the Senior VPs said: “Look Anu, we are now doing OK with the switches. We have sold TWICE as Many this quarter as we did in the last”.

Being the clown that I can be I rejoined: “OK, so you sold one last quarter and now you have sold two”.

The room went deathly quiet. People were looking at each other. The SVP said “lets move on”.

Later that day one of my friends, and I had a lot of friends at IBM, confided that my ‘2’ number though not spot on was very close! And therein is the problem.

Yes, the nWays switches, just as I had maintained, proved to be disasters and IBM was FORCED to get out of networking! The day they announced that my phone didn’t quit ringing. People were calling me to say: “Wow. You were so right”.

But I knew that all along.

I also know right now that IBM is yet again bloated. They had to shed, mercilessly, 40% of headcount. No choice. No caveats. Just 40% across the board.

IBM’s past successes, and they sure ruled the roost for 2 generations, were all due to profiting from PROPRIETARY solutions, mainframes, CICS, SNA and 3270s. There are hugs margins in proprietary solutions. Ask Apple.

These days IBM has to compete with ‘open’ solutions. Much, much more competition and slim margins. And that, in the end, is the problem.

IBM has to slash and burn its overhead. Get rid of the buildings. Get rid of the people. Then it can start again.