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IBM lost its dominance of the computer hardware market back in the 1980s when it allowed other companies to clone its PCs. Instead, although it remains a major force in enterprise servers and storage devices, the group reinvented itself very successfully as the world's foremost technology consulting and services business. As a result it was one of the few IT companies to survive the dotcom downturn virtually unscathed, arguably in better shape after 2000 than it was at any time in the two decades before. Encouraged by that strategic shift, and in a major break with its past, IBM agreed to sell its entire desktop and notebook computer division to Chinese manufacturer Lenovo in 2004. That divestment made barely a scratch on revenues which continued to soar to record levels for 2006 and 2007, bolstered by a series of acquisitions for its substantial software division. The group celebrated its centenary in 2011, but significant challenges began to appear as a result of brutal competition from a new generation of technology services providers led by Amazon and Google, whose already massive server farms adapted far more quickly to the new boom market in cloud computing. IBM compensated by pushing into new areas, not just cloud computing, but also artifical intelligence, data security, blockchain and even digital marketing. Its extensive global services division also houses IBM iX, now one of the world's biggest digital development and marketing services agencies. Ad Age estimated global marketing-related revenues of $5.5bn in 2020. The group expanded its range with a series of largescale acquisitions, including meteorology analyst The Weather Company and open source software developer Red Hat. The latter, completed in summer 2019, was IBM's biggest ever acquisition at a cost of $34bn. Yet group revenues have remained under intense pressure since 2012, declining for eight of the last nine years. For 2020, revenues slipped to $73.6bn, the lowest level for almost three decades. In the latest shift in corporate strategy, IBM unveiled a plan to spin off most of its outsourced IT services business as new company Kyndryl. That separation completed towards the end of 2021, reducing revenues to a new multi-decade low of $57.4bn (though like-for-like revenues were up year-on-year). At the same time, at least in part to head off competition from the likes of Accenture, Deloitte and others, it rebranded its remaining Global Business Services division as IBM Consulting. Software, including "hybrid platform" cloud computing, is now the group's biggest business, accounting for 41% of revenues, while infrastructure hardware - led by the IBM Z server platform - now accounts for just under a quarter, and consulting for most of the rest. Virginia "Gini" Rometty stepped down as CEO in 2020 after a challenging eight-year run. Her successor as CEO is Arvind Krishna.
Capsule checked 31st May 2021
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Historical profile information for IBM
Marketer Moves 19th Jan 2022: New marketing chief at IBM. See Marketer Moves (members only).
Adbrands Daily Update 9th Oct 2020: In another startling unbundling of what were once core businesses, IBM is to spin off most of its services division as a separate company. As recently as the early 2000s, this unit, which handles outsourced IT operations for corporate customers, was considered the core of IBM's business. However, many clients have now migrated their requirements to cloud computing services offered by rivals such as Amazon, Microsoft and Google, and IBM's revenues from outsourcing have fallen sharply. The operations to be divested - IBM's managed infrastructure division - contributed sales of $19bn last year, or around a quarter of total group revenues. In terms of scale, this unbundling is even more significant that the spin-off of IBM's PC operations in 2004. The slimmed down IBM will have almost halved in revenues since its 2011 peak of almost $107bn. It will instead sharpen its focus on cloud computing and artificial intelligence.
Adbrands Daily Update 31st Jan 2020: Ginni Rometty is to step down in April as CEO of IBM after a troubled eight-year stint. Arvind Krishna, who currently heads the group's cloud services division, moves up to CEO while Jim Whitehurst, chief executive of newly acquired Red Hat, becomes president. An IBM lifer who has spent almost 40 years with the company, Rometty has wrestled with multiple challenges since taking the top job. In particular, the group was caught off-guard by the rapid shift towards cloud storage, in which it was quickly eclipsed by other companies. Annual revenues have fallen for seven of the eight years under her command, and IBM's share price has fallen by 25%. In that same period, Microsoft's share price has grown by more than 500%.
Adbrands Daily Update 23rd Jan 2019: IBM's 4Q revenues dipped again year-on-year but investors were pleased with better profit performance and a bullish forecast for the current year. Growth remains an issue. In the past 24 quarters, the once-mighty tech group has delivered positive year-on-year growth just three times. CEO Gini Rometty is banking on a push into less traditional areas like cloud computing and data analytics to counter the steady decline in servers, storage and IT services. Full-year revenues edged up 1% to $79.6bn - the first annual increase since 2011 - while net income soared by more than half to $8.7bn. The prior year included a large write-off as a result of Trump's tax cuts.
Adbrands Weekly Update 1st Nov 2018: Struggling with a continuing decline in performance, IBM launched its biggest ever acquisition with a deal to buy software and services company Red Hat for $34bn including debt. It's the biggest ever acquisition of a software company. The target is a leading supplier to large corporations of the Linux operating system and other open source software. Linux itself is free, but Red Hat offers its clients a customised version with additional technical support. The key factor for IBM is that Red Hat has come to specialise in building solutions that allow large corporations to work with multiple cloud-computing providers, for example Amazon and Microsoft (or indeed IBM) for cloud-infrastructure, and Salesforce.com and Workday for applications. "Already they can see what I would call cloud sprawl," said IBM CEO Gini Rometty, "and they have to have a way to manage it." IBM's offer is more than 60% above Red Hat's most recent undisturbed valuation, and over 10 times annual revenues.
Adbrands Weekly Update 10th May 2018: Weber Shandwick was appointed as the new global PR lead for IBM, taking over from multi-year incumbents Text 100 and Ketchum. Weber will oversee a "blended" team that will also incorporate personnel from public affairs specialist SKDKnickerbocker, healthcare agency Spectrum Science and Civic Entertainment Group, the agency owned by TV celebrity host Ryan Seacrest.
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