IBM Is Still Working on Profitability, Even as Sales Growth Remains Stalled

Despite a marked inability to accelerate sales growth, IBM® is, arguably, moving, with some success, to lower operating costs by jettisoning losing businesses, along with those producing only marginal profits. On January 23, 2014, IBM announced the sale of its x86 server business to Lenovo. On February 6, 2014, The Wall Street Journal published an article by Don Clark and Spence E. Ante, “IBM Looking to Sell Chip Manufacturing Operations”. This article notes IBM’s efforts to spin off its chip manufacturing business. The article also mentions IBM’s intention ” . . . to retain its chip-design capability.”

So why is IBM jettisoning the same chip manufacturing capabilities Intel® is using to power its “build it with Intel” product offer? Clark and Ante mention some important losses in their article, including the chip manufacturing business for both the Sony PlayStation 4 and the Microsoft XBOXONE. I would also add to this list Apple’s Mac PC, which was redesigned in the early years of the new millennium and debuted in 2006 with Intel x86 chip architecture. Tellingly, the laggard in the game console business, Nintendo, still gets the chips for its consoles from IBM.

So I’m dubious about how valuable IBM’s ” . . . chip-design capability” will prove to be, at least over the remaining tenure of the present senior management team. After all, if IBM had won the Sony and Microsoft business for their latest game consoles, perhaps the consumer market wouldn’t have experienced the dearth of these products over the 2013 holiday season. Is it, perhaps, safe to say, the chip-design team is not producing the killer creative ideas they did in the past?

I think so. Would it make sense, therefore, for the public naysayers about Microsoft’s current condition, and its choice to replace Steve Ballmer with Satya Nadella, to turn their attention to IBM? Certainly IBM represents a business truly in need of a turnaround, and, I would argue, a major management restructuring. Would Alan Mulally like a move to Armonk, NY?

Disclaimer: I have no investment in IBM, but am long Microsoft

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Let’s Not Over-Emphasize Cloud When We Talk About Microsoft’s New CEO, Satya Nadella

Many popular writers are reporting on the appointment of Satya Nadella as the new Microsoft® CEO. Most of them have chosen to focus on Mr. Nadella’s expertise as the leader of Microsoft’s cloud products group. But Mr. Nadella’s responsibilities also include the role of head of the enterprise products group. Server sales for this group were some of the most profitable business the company generated in its latest quarter.

Microsoft® has introduced Satya Nadella to the world via a web page titled Satya Nadella. Anyone with an interest in the company should visit the page, and, in particular, take a few moments to watch each of the four videos included on it.

The longest of these videos is an interview with Mr. Nadella. The other three videos provide personal opinions about Mr. Nadella’s appointment as the new CEO of the company from Bill Gates, Steve Ballmer, and John Thompson, the new Chairman of the Board.

When I watched the interview with Mr. Nadella, I was most taken not by the mention of the importance of the cloud and mobile computing as markets Microsoft has somehow overlooked, or failed to address successfully. Rather, I was taken by his focus on the pressing need to renovate the organizational structure of this very large business, soon to employ 160K people across the world (once the acquisition of the Nokia handset business is finally completed).

The point I got clearer than any other was Mr. Nadella’s perception of the near term imperative of liberating the potential for technical products/services innovation. Somehow the organizational structure of this business has stifled innovation. Mr. Nadella seems determined to change the structure. At the same time, he is also clearly interested in making Microsoft a more enjoyable place to work.

So the takeaway for me, about the most pressing needs the business faces, is the need for organizational change. The board of directors has chosen to address these needs through the appointment of Mr. Nadella.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Does It Make Sense for Google to Continue to Pursue a Brand on the Societal Edge?

On Monday, November 25, 2013, The online New York Times published an article by Andrew Pollack titled F.D.A. Demands a Halt to a DNA Test Kit’s Marketing. The DNA Test Kit of interest is manufactured and marketed by 23andme, a business operating with the financial backing of Google.

Opting to invest in a product like this one, from 23andme, which is positioned at the edge of the range of products sanctioned by the U.S., as a society, is, to put it kindly, a questionable decision by management. Google is a publicly traded business and, therefore, has a responsibility to its shareholders, one would think, to provide notice to them of any intention to proceed on an investment like backing 23andme, before proceeding on it.

Unfortunately this isn’t the first example of risky product marketing decisions on Google’s part. Google Glass is another. Once again, mainstream media picked up on a recent case where a woman received a speeding ticket, in California, along with another ticket for wearing Google Glass.

One needs to ask if product marketing at Google is aware of how they are branding the business by pursuing these types of products, and, once again, if it’s in the best interest of Google shareholders to proceed in this direction.

From the looks of the initial advertising campaign for the Moto X smart phone (which hasn’t fared too well with the public), it would seem product marketing is aware of the “edgy” brand Google is magnetizing, and may want to keep it that way. The initial campaign, as I wrote about earlier in this blog, was memorable for the models it included who all sported a lot of tattoos.

I’m wondering if Google is interpreting all of this “edginess” as a correct way to pursue the kind of “business as a rebel”, which Steve Jobs used with great success. If they do see a Jobs connection, they should, perhaps, follow his lead and do a better job of very carefully selecting ad agencies and PR firms to spread the word.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


On Steve Ballmer’s “Transforming Our Company” Memo as a Public Relations Document

Much has been written about the “One” Press Release published by Microsoft® on Thursday, July 11, 2013. But we think the accompanying memo, “Transforming Our Company” is an equally important piece of public relations collateral for markets to digest.

The memo is written for internal publication, but a link to it is provided in the press release as posted to Microsoft’s public website. So the Public Relations team at Microsoft clearly planned this piece of content to be read by the general public.

This piece reinforces cornerstones of Microsoft’s product brands, and paints them with a picture of a company intensely focused on transformation. Simply consider the following statement, which we have excerpted from the memo: “We will strive for a single experience for everything in a person’s life that matters. One experience, one company, one set of learnings, one set of apps, and one personal library of entertainment, photos and information everywhere. One store for everything.” This statement provides little indication of a transformed Microsoft. Since the mid 1980s Microsoft has espoused the importance of personal computing. Further, Microsoft has always embraced a scalable architecture for its software products. The design principles of Windows 8 for PCs, Windows 8 for smartphones, and Windows 8 for tablets are clearly rooted in a commitment to a consistent, cross platform user experience.

But what is new about the statement we’ve quoted and the rest of the memo is a tone of urgency, The memo is written very much in the style of a “declaration”, meaning a position statement formalizing a new direction for the company, which includes scant opportunity, if any at all, to turn back.

Early stage technology businesses can benefit from a close study of this type of public relations content. In the two stock trading days since the press release and memo were published, the value of Microsoft shares outstanding has increased by more than 5%. Not bad for a couple of pieces of public relations collateral.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Dell Q3 FY 2013 Results Point to a Need for Better Management of Its Business Transformation

We sat through a webcast of Q3 FY 2013 conference call for Dell. Our rationale for spending the time required to attend this earnings presentation was simple. We are investors in Dell. As well, we are largely focused on realities and potential trends in IT computing for enterprise businesses and comparably sized organizations in the public and/or private sectors. Regardless of Dell’s present condition, the company is, nevertheless, a major factor in our area of focus, and, therefore, worth our attention.

It is hard for us to believe, but nevertheless true (per this report), that Dell embarked on its effort to transform itself into an “end to end” solution for enterprise markets four years ago. Brian T. Gladden, SVP and CIO makes mention of this fact at the start of this webcast presentation of the Q3 results. Gladden also notes that this “end to end” product produced approximately $4.8 Billion in earnings for the quarter, which, by any standard, is a considerable amount of money. But the composite growth rate, at a mere 3%, in our opinion, is much more indicative of a stable, mature business, than a growth vehicle. Further, the fact that the leading group of products in this complex set of solutions (in terms of revenue generation), namely hardware servers and network equipment, are simply the foundation for Dell’s growing set of offers at the application layer (principally Quest Software) says to us that enterprise IT spending on software is largely at a standstill, at least for Dell.

Mr. Gladden noted that total company revenue was down 11% year over year, but still within the range management forecasted in August, 2012 (albeit at the low end of that range). Gross margin, at 22% declined 60 basis points, from Q2 fy 2013. We think that some of this decline in gross margin can be attributed to what we have written about elsewhere in this blog, namely, the phenomenon whereby IT software is trending, from the customer, demand, perspective, to mere commodity. Profitability was shored up by careful management of operational expenses (OPEX). Nevertheless, earnings per share amounted to a 28% reduction below Q2 fy 2013.

Sales of network hardware grew by 40%, which is impressive. Mr. Gladden noted that Dell launched its “Active Infrastructure Converged Offering” in this quarter. This offer includes hardware, software and services components ” . . . under a common design architecture . . .” (quoted from Dell’s webcast, which can be accessed from the Dell website, for which a link has been provided above). He characterized the market forces driving this offering as a need for “simpler” solutions.

Per Mr. Gladden, the drop of 3% in sales of storage solution resulted in revenue that fell below management’s expectations. Nevertheless, he characterized this drop as more the result of weaker market demand than any competitive factors.

Our conclusion from this section of the Dell webcast is that enterprise IT spending on data center, on premise solutions is on hold, at least for the class of solutions offered by this vendor. Further, and with specific reference to Dell, itself, we think that the fact that hardware components — namely servers and network devices — remain key revenue drivers, despite 4 years of transition, indicates some management difficulty with regards to truly transforming this business.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Selling Enterprise IT Software Without a Marketing Plan is Like Looking for an Outfit in a Very Cluttered Dark Closet

Depending on the size of one’s closet, and the amount of clothing to be found in it and, finally, the manner in which the clothes are organized, it can be very difficult, if not impossible to find an outfit when the lights are out and it is not possible to illuminate the closet. Of course, once the lights are back on, it may be only a matter of a couple of minutes between deciding on an outfit for a day and actually finding the jacket, slacks, shoes and tie that match. Therefore, it is safe to say that light goes a long way to hasten the process of locating items in a cramped, very, very busy closet full of clothing.

Selling products/services/integrated solutions into the complex market that operates on enterprise IT software is very much akin to finding an outfit in the busy closet that we just described. Top ranked sales people, with exceptional backgrounds closing large ticket sales, can still prove to be completely ineffective in these markets. Sales forecasts can prove to be useless predictions that are rarely, if ever achieved. The missing piece, for better or worse, is a lack of a clear marketing plan for

  1. the business
  2. products
  3. and how to promote 1) and 2) to the enterprise IT market

In fact, a plausible marketing plan functions much like a brilliantly bright halogen lamp with a diffuse, wide beam that successfully illuminates every cranny of the closet mentioned in our analogy. We cannot overstate the importance of the fact that the plan must be plausible. The best way that we know of ascertaining the plausibility of the plan is to circulate a formal document to a group of carefully picked individuals who can provide the opinions required to ascertain that the plan is, in fact, realistic and workable. Therefore, we counsel entrepeneurs contemplating starting a business to make sure that a circle of confidants is in place who can keep a business effort on track with their opinions prior to launching a venture. In fact, the best way to put together this circle of reviewers is to form a board of directors, which is, traditionally, the manner in which businesses have been organized in the past.

The sum total of a marketing plan that has been vetted by a board of directors, and a capable sales team can, in fact, be promising for a business venture. If you understand the importance of both of these components, think that you have an excellent business concept, but neither have the personal connections required to assemble a useful board of directors, nor the resources to produce a formal marketing plan, then you should contract with a third party to get the job done.

IMB Enterprises, Inc. calls on over 25 years of continuous experience with early stage tech businesses. As well, we maintain a network of contacts that may produce the board members that a business like yours requires. Our retained services (3 mos minimum) start at $3200.00 per month. Please contact us to learn further. You can call Ira Michael Blonder at +1 631-673-2929 to further a discussion about our services plan. You may also email Ira at imblonder@imbenterprises.com.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


A Business Plan Provides an Enterprise IT ISV with an Important Reality Check

Most entrepeneurs understand the value of a business plan. For example, anyone who has ever availed of the free-of-charge advisory services offered by SCORE has had to deal with the question: “Let’s have a look at your business plan”. In turn, the United States Small Business Administration and other financing entities strictly require that any funding application include a copy of a business plan.

But for many businesses, including a proportionate number of very early stage enterprise IT ISVs, producing a comprehensive business plan that accurately reflects each feature of a business concept is a monumental task that somehow “just doesn’t get done”. This reality is, in fact, a shame, as an oversight like neglecting to complete a formal business plan can prove to be a life threatening matter for a business.

In fact, a business plan constitutes a highly useful reality check for the business, especially for one that is built on technology innovation. For example, where a tech start up is otherwise weak with regards to marketing and sales, a well put together business plan that talks to these two essential topics in a plausible manner can be convincing and useful. Of course, if the sections of a business plan devoted to

  • a presentation of a market,
  • to the depiction of planned products/services/integrated solutions and, finally,
  • to the method by which a business will generate revenue through sales of the products into the market

are to be believed, then the historical performance of the business must bear out the points of the plan. In fact, it is easier to follow a plan that is objectively found to make sense, and promising, without key marketing and sales staff than it is to proceed aimlessly with marketing and sales personnel who seem to have the “right” skills and experience set, but still fail to deliver required results. The difference, of course, amounts to the fact that the company without staff that, nevertheless, still hits its numbers is operating under a plan, whereas the company with staff, but performing poorly neither has a plan, nor understands the importance of operating from points that must be formalized in a plan prior to activation.

Bear in mind that by plan we are referring to the document that we have described, which formalizes the features of a business. Further, this plan has been reviewed by a number of different parties who, in a consensus, have agreed that its features are plausible and ought to be activated.

If you understand the importance of a formal business plan, but lack the internal resources to either contribute the features required, or to produce a well written formal document that conforms to the style conventions required byt the individuals to whom you intent to present it, then you should contract with a third party to get the job done.

IMB Enterprises, Inc. brings considerable experience to this type of requirement. Our retained services (3 mos minimum) start at $3200.00 per month. Please contact us to learn further. You can call Ira Michael Blonder at +1 631-673-2929 to further a discussion about our services plan. You may also email Ira at imblonder@imbenterprises.com.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Successful Enterprise IT ISVs Include Sales and Marketing Management in the Executive Team

The technology industry does not promise entrepeneurs immunity from the infection that threatens 49%, or more, of legitimate small businesses started here in the United States of America — likely demise within the first 5 years of business activity. This figure is an approximation of specific data presented in a paper, “Examining the Credit Access on Small Firm Survivability”, which was published online on February 24, 2012 by the Federal Reserve Board of the United States. For our purposes, a legitimate small business is one with assets valued in excess of $0, or annual sales in excess of $1000.00.

Nevertheless, technology entrepeneurs often maintain an opinion that ostensibly superior engineering, alone, can provide the impetus required to propel a business notion into a viable organization that can quickly achieve self support and, later, deliver handsome returns on efforts made to its owners. This opinion also supports an equally dangerous assumption that it is perfectly fine to pin the success or failure of a business venture on a “solution without a problem,” meaning a technical product/service/integrated solution that may exhibit quite elegant features, but fails to address any palpable market requirement.

Both of these features of failure:

  1. excessive confidence built on nothing more than an assumption that engineering, alone, will make a business notion into a winner and
  2. dedicating resources to developing products that are not requested by markets

can do enough damage to lead business owners to cease activity if left unchecked.

In fact, these ideas stem for a pervasive under estimate of the importance of marketing and sales management to the success of any type of business in the United States. It is of no material importance whether or not marketing and sales expertise is delivered by a business entrepeneur, or by his/her management team. Regardless, understanding the principles of marketing, including:

  • business positioning
  • product marketing
  • and marketing communications

and sales, which, for enterprise IT ISVs must include a thorough mastery of selling

  • products/services/integrated solutions to a complex set of buyers
  • in an entirely ethical manner

must be present, or else the likelihood of business failure will be quite high. Despite lots of consternation, tech entrepeneurs will need to fully assimilate the mandatory nature of provisioning this type of expertise if a business notion is to prove successful.

If you understand that your business notion requires a level of marketing and sales expertise that you either do not possess, you need to address this deficiency as quickly as possible by either adding strategic partners, or hiring management staff. If time is an important consideration, then you ought to look to temporary resources to fill these gaps in your business plan.

IMB Enterprises, Inc. is certainly capable of providing you with resources that can fill these roles for your business. Our retained services (3 mos minimum) start at $3200.00 per month. Please contact us to learn further. You can call Ira Michael Blonder at +1 631-673-2929 to further a discussion about our services plan. You may also email Ira at imblonder@imbenterprises.com.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Build a Productive Sales Organization with Healthy Contention and Competition

Productive sales organizations are built with healthy competition. Selling any products, services or so-called solutions (in my opinion, solutions are almost always a combination of products and services) requires successful completion of at least three critical competitive milestones within an engagement with a prospect (or in the case of complex products, services and solutions, prospects):

  • Convincing
  • Persuading, and
  • Closing

Each of these three critical milestones, if achieved, mark a moment of success in the sales engagement where the sales person, rather than a competitor, won a commitment from the prospect. No brainer, right?

Now let’s jump to a review of a typical sales organization within a business. Sales organization are generally managed by one individual with a title like Head of Sales, or Vice President of Sales, or the like. This layer of management is in place to accomplish at least two objectives: 1) to alleviate the work load carried by the CEO and 2) to deliver the revenue objectives for the business through sales. Of course, the order of these two objectives may be reversed, depending on the life cycle stage of the business and/or management priorities. Nevertheless, these two broad objectives underpin sales management structures across almost any type of business with more than twenty staff members (twenty is an arbitrary number).

With a sales organization in place (complete with its own management), accountability for successful delivery of sales objectives is in place. However, an important and almost imperceptible shift has also taken place. A level of healthy competition has been removed. There is now, in fact, only one Head of Sales/Vice President of Sales with no competitor.

Fostering a business with this type of hierarchical organizational structure for sales makes sense as long as objectives are achieved. When objectives stop being achieved, it makes sense to inject back into the sales organization a level of contention and competition amongst the sales staff to get activities back on track. Better yet, modify the structure of the original sales organization by permitting a hierarchical and necessarily vertical structure with a Head of Sales to function upon a completely horizontal “playing field” where hire/fire and other major organizational decisions may only be made by the CEO or Head of Operations, etc.

I have participated in two business engagements where dramatic results were achieved via the modified sales organizational structure that I have just described. In one case, objectives were rarely missed. In fact, the modified sales structure was in place from the start of serious business activity, in the form of a matrix sales structure. This matrix sales structure included outside sales staff who “teamed” with teleprospecters and inside sales staff who reported to a separate sales manager. Healthy contention within this matrix sales structure took this brick and mortar business from zero to $7M in annual sales within two years. Within the following five years the business went public.

In the second case, the CEO applied the horizontal structure after the hierarchical structure failed to produce the required results. Once again, the improvement in the overall performance of the sales team was dramatic and completely positive. Further, gaps in product marketing were revealed which, once filled, provided a healthy foundation for a surge in revenue.

Bottom line: Sales is all about healthy competition. Remove the competition and you may end up removing sales.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2011 All Rights Reserved