IBM® reported a lot of progress re-positioning its business units to service target markets after cloud solutions in its Q2, 2013 earnings report. Two points stand out for us:
- A large divestiture is in the works, though timing no longer points to a close in fiscal 2013
- A couple of acquisitions — Kenexa and Softlayer Technologies — promise to contribute substantially to IBM’s competitiveness in the public cloud and human resources automation markets
IBM management had hoped to offset a $1 Billion “workforce rebalancing” charge, taken in Q1, 2013, with the profits from a planned divestiture of a large business unit, but timing is no longer favorable.
Kenexa, a clear competitor to Workday, as we see it, is included in the “Social Software” business unit, which was reported to have produced 20+ percent improvement in performance in Q2 2013. This business unit also includes the Lotus Notes business, which has been rebranded IBM Collaboration software.
Rebranding Notes makes sense and better positions the product to compete with Microsoft® SharePoint®.
The Softlayer Technologies acquisition provides IBM with a competitor to Amazon AWS and Microsoft® Azure®. This market is largely made up by larger SMBs.
The backlog claim is particularly impressive and, from the earnings report, is almost all due to substantially improved software sales. With strong software sales already booked for the second half of the year, the drag of diminishing sales of hardware products (with the notably exception of the Mainframe product line) is substantially diminished.
IBM reported particularly strong performance of its “branded middleware” business. Global Business Services (GBS) and Global Technology Services (GTS) showed improvements and clear progress towards profitability.
All of this points to large enterprise customers looking to maximize the value and inherent cost savings of mainframe computing plant already in place, while paring back on any expansion of on premises infrastructure. IBM appears to be listening to what the market is after.
Ira Michael Blonder (https://plus NULL.google NULL.com/108970003169613491972/posts?tab=XX?rel=author)
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