Ballmer Dishes on Big Blue; Why Should Ellison Have All the Fun?

Published: October 12, 2009

by Timothy Prickett Morgan

Last week, it was Oracle's chief executive officer, Larry Ellison, explaining how he wanted to buy Sun Microsystems to be the platform company of the 21st century as IBM was back in the 1960s, 1970s, and 1980s. And now we have Microsoft's CEO, Steve Ballmer, bashing Big Blue for its profit-obsessed business strategy.

Yes, we have woken up, once again, in BizarroWorld.

In an interview with the New York Times, Ballmer basically called IBM a chicken, one that ditches businesses that it helped create--networking, memory chips, disk drives, PCs, printers--in an obsessive desire to squeeze profits out of everything it does.

"IBM is the company that is notable for going the other direction," Ballmer told the Times, a paper that has had strong ties to Big Blue for decades for obvious reasons. (Both are New York institutions that have tried to go broke more than once.) "IBM's footprint is more narrow today than it was when I started. I am not sure that has been to the long-term benefit of their shareholders."

You can criticize IBM for not figuring out how to make a disk drive or a PC or an operating system for it profitably--I am with you there. But I think it is perfectly idiotic to suggest that IBM needs to stay in businesses that it cannot make money in, at least from the point of view of shareholders. From the point of view of an observer and sometime participant in the IT sector, I think Big Blue had benefits to gain by staying in the PC and related desktop operating system space, and I would agree that an IBM that thinks the way it clearly does might be sorely tempted to stop making servers and farm that job out to someone else, too.

IBM normally brushes off this kind of criticism, and its own soft-spoken top exec, Sam Palmisano, is not one to take any argument he might have about IBM's tactics and strategies to the press. But a few days later, at an event hosting Palmisano and the newly designated and first chief information officer for the Federal government, Aneesh Chopra, IBM's president, CEO, and chairman didn't take the bait, but did make an oblique reference to Ballmer's criticism, which was again reported in the Times.

"People say IBM invented the PC, I.B.M. invented the disk drive. Why sell it?" Palmisano asked rhetorically, and then answered it saying that "a $300 netbook is a commodity" and that businesses get trapped by their "cultural resistance to change."

In past speeches, Palmisano has referred to IBM's own resistance to change in the early 1990s as a "near death experience" where the company had to lay off nearly half of its 400,000 employees and radically transform itself. It is not clear that Palmisano was intimating that Microsoft had itself become a legacy IT supplier itself, one trying to expand into new markets while holding rigidly to the monopolies it has, but the comparison between the Microsoft of the late 2000s and the IBM of the late 1980s is probably not lost on long-time IT observers. A lot of what Microsoft does these days is to react to what other players do and to spend great big buckets of money trying to chase new markets established by other players--just like IBM used to do.

Ballmer is probably just miffed that IBM likes Linux, is happy to sell Lotus Symphony as a replacement for Office, is still selling Notes and Domino against Outlook and Exchange, and can still sell Power Systems and mainframes against Windows boxes at a lot of accounts.

I think IBM needs to go back to being a full platform company, from the chip up through applications--the kind of thing that Ellison is trying to build with the combination of Oracle and Sun. If there is any justifiable criticism of IBM, it is that it is far too happy to make money helping customers cobbling together mix-and-match IT systems and not interested enough in building integrated systems that include applications, like the AS/400 of days gone by.

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