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  • IBM Sells Retail Systems Biz To Rival Toshiba For $850 Million

    April 23, 2012 Dan Burger

    IBM, the global leader in point of sale and related retail store systems, has checked out. Big Blue has bagged another portion of its hardware business, and the IBM cash register is singing to the tune of $850 million. Stepping up as buyer and partner is Toshiba TEC, which cartwheels from fourth to first in the POS field leaving behind the likes of Hewlett Packard, NCR, Panasonic, and Fujitsu. That trio has yet to react to the sale and multi-year agreement between IBM and Toshiba, which creates a formidable tandem.

    Toshiba, which is Japan’s leading maker of point-of-sale systems and related technology for retailers, gains a much broader product portfolio, a global customer base, and a worldwide distribution and sales organization. It also moves up to the top tier of the IBM business partner echelon.

    IBM takes another step away from the commodity hardware business and does what it does best these days, which is selling software and services. In this case, it’s what IBM calls Smarter Commerce software and services, where it will rely on its business expertise fueled by its ever-growing appetite for buying data deciphering technologies. The developing, manufacturing, and distribution of hardware will be left to Toshiba, although that won’t happen immediately.

    Retail Store Solutions, which is IBM’s internal name for its point of sale business, is what most of us would recognize as a retail checkout system. The functionality it provides, however, integrates areas such as sales and cash management; connections to scanners and payment systems; exchange and warranty provisions; and special order capabilities among other features commonly packaged in ERP systems. IBM is selling the hardware and software aspects of this business, but is maintaining its considerable interests in services.

    How big is this business that Toshiba will soon take over? IBM’s financial results for 2011 showed hardware sales from its RSS unit producing about $715 million in revenue. Total revenue attributed to RSS, including software and services, in 2011 was $1.15 billion.

    The agreement portion of this deal, a three-year contract, created a holding company with Toshiba owning 80.1 percent and IBM keeping its hands on 19.9 percent. Part of IBM’s responsibility in this arrangement is to contribute hardware development. Without that input, IBM customers undoubtedly would get a little nervous.

    Besides, this is the way IBM likes to do business. Similar circumstances occurred when IBM sold its PC business to Lenovo, its printer business to Ricoh, and its disk drive business to Hitachi. Customer complaints from those deals have not even rippled the waters.

    In terms of the IBM i portion of its point of sales business, there are no statistics available from IBM on that. However, I talked with Kevin Beasley, chief information officer at VAI, an ERP vendor closely tied to the IBM i platform, for his take on the POS market. Beasley says approximately 20 percent of VAI’s retail customers use IBM’s POS hardware and notes “many of the largest retailers use IBM i and consider it an asset.” One of those assets is real-time connection to the ERP system.

    Beasley also added there are more retail companies running their POS systems on the IBM i platform than most people think, but that POS hardware is truly commodity hardware, something that IBM got right, but may believe won’t pay off in the long run in terms of profits. Compared to most IT hardware, he says, companies expect to own POS hardware for seven years or longer on their computer hardened and secure devices. “We’ve never had an issue with our customers running on IBM i.”

    Beasley pointed out that IBM deserves a lot of credit for getting out of the PC business, referencing the sale of that commodity hardware to Lenovo in 2004. Since that time tablets and mobile devices have eroded PC sales and that trend continues, which makes IBM’s decision the right call.

    The POS business is a replay of that trend, with many industry insiders forecasting huge gains on the horizon for tablets and smartphones. Customer interaction with products is a big reason retailers are excited. It’s fast becoming a self-serve world, and with the popularity of tablets and smartphones enhancing the customer experience, it’s difficult to ignore their potential as a point of sale resource that can drive sales. And on the retail side, they can be used to process orders and track inventory. Durability and security remain question marks, however.

    It’s a very good possibility that IBM made another smart move to get out of the POS hardware business when it did.

    IBM expects the RSS deal with Toshiba to close around the end of the second quarter or possibly early in the third quarter. IBM will resell RSS gear from the holding company for three years, and at the end of that contract Toshiba TEC will take sole ownership of the business.

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Volume 21, Number 16 -- April 23, 2012
THIS ISSUE SPONSORED BY:

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Table of Contents

  • AWS/400: Amazon Builds An AS/400-oid Cloud
  • IBM Loses Money On Hardware In Q1
  • Summit Partners Acquires Control Of Help/Systems–Again
  • Mad Dog 21/21: Drivers Of The Purple Sage
  • Third Party’s A Charm For JDE Maintenance Contracts
  • IT Spending Projections Crimped For 2012
  • IBM Sells Retail Systems Biz To Rival Toshiba For $850 Million
  • IBM Rochester Gets A Piece Of the PureSystems Action
  • What’s Your Digital Personality?
  • Coglin Mill And Help/Systems Tag Team For Analytics

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