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  • IBM’s Market Value Passes Microsoft After 15 Years

    October 3, 2011 Timothy Prickett Morgan

    Well, it only took a decade and a half, but as far as Wall Street is concerned, IBM is now as valuable as Microsoft.

    On late Friday, as I was putting together this newsletter, IBM’s stock was hovering around $178 a share, giving Big Blue a market capitalization of $212 billion. That’s a little bit off from the $185.63 high that IBM set back on July 22, but with Microsoft’s shares falling (for a variety of reasons), IBM has pulled slightly ahead of Big Bill at the Thursday close. Microsoft had recovered a little to a $215 billion valuation by Friday afternoon. Neither can come close to Apple, which has a stock price of $385.32 as I write this and which gives it a market cap of $370 billion.

    As the dot-com, ERP, and distributed computing booms were roaring at the turn of the last century and the PC was very much the device we all used to compute, Microsoft’s market cap kissed a whopping $600 billion, so its fall from grace on Wall Street has been quite dramatic.

    Then again, how many hundreds of billions of dollars of profits has Microsoft pocketed in that time? This, as far as I am concerned, is a much better metric than market capitalization. One is gambling on what something is worth (that’s the casino down on Wall Street), while the other is an indisputable pile of cash leftover after paying the employees and the bills (I believe in net income, not earnings per share). I did the math. Since 1995, when Microsoft was less than one-tenth of its current size in terms of annual revenues, the company has brought a combined $148.2 billion to the bottom line against $518.2 billion in sales. That works out to profits of 28.6 percent of revenue on average across those years.

    This is the kind of financial performance that IBM could deliver in the 1960s and 1970s, against a much smaller computer business, of course. So how did IBM do? Take a look at this chart:

    Over that same time frame, IBM has brought in $1.34 trillion–that’s with a T–in revenues, but only brought $129.4 billion to the bottom line. The chart above starts in 1989 for IBM, which is just before the mainframe business went up on the rocks, Unix servers took off, the PC business was slammed by a recession, and the AS/400 business was one of the few pieces of good news. In 1991 through 1993, IBM lost a total of $15.9 billion, which was the largest losses ever posted by an IT vendor and, as I have said before, I think if you looked at Big Blue’s cash flow in 1992, it was technically bankrupt. But Lou Gerstner came in and got IBM focused on services, and that got Big Blue back onto its track.

    It is, however, a track that throws off inherently less cash–and less cash per dollar of revenue, too. Microsoft’s monopolies with Windows and Office on the desktop and Windows and its related systems software on servers are, in the final analysis, stronger than the monopolies Big Blue still has with mainframes and IBM i boxes. WebSphere and DB2 are the closest things IBM has to monopolies, which is why you can expect Oracle to target them like a laser any minute now. Once Larry Ellison is done messing with Hewlett-Packard –perhaps after acquiring it–you can bet the Oracle co-founder and CEO will turn his attention to Big Blue. Because he sure as hell can’t take on Google or Apple.



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    UCG Technologies – Vault400

    Do the Math When Looking at IBM i Hosting for Cost Savings

    COVID-19 has accelerated certain business trends that were already gaining strength prior to the start of the pandemic. E-commerce, telehealth, and video conferencing are some of the most obvious examples. One example that may not be as obvious to the general public but has a profound impact on business is the shift in strategy of IBM i infrastructure from traditional, on-premises environments to some form of remote configuration. These remote configurations and all of their variations are broadly referred to in the community as IBM i hosting.

    “Hosting” in this context can mean different things to different people, and in general, hosting refers to one of two scenarios. In the first scenario, hosting can refer to a client owned machine that is housed in a co-location facility (commonly called a co-lo for short) where the data center provides traditional system administrator services, relieving the client of administrative and operational responsibilities. In the second scenario, hosting can refer to an MSP owned machine in which partition resources are provided to the client in an on-demand capacity. This scenario allows the client to completely outsource all aspects of Power Systems hardware and the IBM i operating system and database.

    The scenario that is best for each business depends on a number of factors and is largely up for debate. In most cases, pursuing hosting purely as a cost saving strategy is a dead end. Furthermore, when you consider all of the costs associated with maintaining and IBM i environment, it is typically not a cost-effective option for the small to midsize market. The most cost-effective approach for these organizations is often a combination of a client owned and maintained system (either on-prem or in a co-lo) with cloud backup and disaster-recovery-as-a-service. Only in some cases of larger enterprise companies can a hosting strategy start to become a potentially cost-effective option.

    However, cost savings is just one part of the story. As IBM i expertise becomes scarce and IT resources run tight, the only option for some firms may be to pursue hosting in some capacity. Whatever the driving force for pursing hosting may be, the key point is that it is not just simply an option for running your workload in a different location. There are many details to consider and it is to the best interest of the client to work with an experienced MSP in weighing the benefits and drawbacks of each option. As COVID-19 rolls on, time will tell if IBM i hosting strategies will follow the other strong business trends of the pandemic.

    When we say do the math in the title above, it literally means that you need to do the math for your particular scenario. It is not about us doing the math for you, making a case for either staying on premises or for moving to the cloud. There is not one answer, but just different levels of cost to be reckoned which yield different answers. Most IBM i shops have fairly static workloads, at least measured against the larger mix of stuff on the public clouds of the world. How do you measure the value of controlling your own IT fate? That will only be fully recognized at the moment when it is sorely missed the most.

    CONTINUE READING ARTICLE

    Please visit ucgtechnologies.com/IBM-POWER9-systems for more information.

    800.211.8798 | info@ucgtechnologies.com

    Article featured in IT Jungle on April 5, 2021

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Volume 20, Number 33 -- October 3, 2011
THIS ISSUE SPONSORED BY:

Help/Systems
New Generation Software
Infinite Corporation
Computer Keyes
VAULT400

Table of Contents

  • Oracle Takes The Midrange Fight To IBM
  • Business Risk Analysis: The New ‘Alba’-rithm
  • Velocity Buys JD Edwards App Hoster WTS
  • Mad Dog 21/21: Bier Or Hospice, That Persistent Thirst For Legacy
  • Great People With Good Tools
  • Reader Feedback on New Systems and QuickTransit Emulator
  • IBM Invests Nearly $4 Billion In Next-Gen Chip Tech
  • Top 10 Ways to Reduce IT CapEx and OpEx Costs
  • IBM’s Market Value Passes Microsoft After 15 Years
  • Continued U.S. Investments In IT Pay Off

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