IBM is taking some bitter medicine right now in its series of divestments. Big Blue recently exited the chip manufacturing business by spinning off that division to Globalfoundries. The move comes on the heels of having exited its server business and voice and transaction BPO business. There’s a lot of media attention to “IBM’s blues” and a lot of water cooler talk about what IBM is up to. Are they going to be viable, or do they have a foot in the grave? I look at it as they are ensuring that they have both feet on a very solid growth platform.
But the series of divestments raise a lot of eyebrows and create shareholder discomfort. It takes time for shareholders and customers to process what IBM is doing.
Here’s what’s happening:
- The divestments were not failed businesses. They just are not the future of IBM. The company is simply pruning back its operations that have been a drag on earnings and siphoning their management attention and resources.
- IBM has been acquiring almost one company per month, largely in the areas of cloud software, analytics and Big Data.
Often the assets IBM sells do well in other hands. Lenovo has done very well with IBM’s former PC business and looks to do well in the server business. And I expect Globalfoundries to do well with the chip business.
Simply put, IBM is remaking itself and making very deliberate and assured steps for its future. It is rare for large organizations to have the discipline to exit businesses. Most large organizations are eager to buy new growing businesses but struggle in the divestment of businesses that are no longer strategic or are struggling to perform. But IBM has managed to remake itself a number of times in their long, historic journey.
IBM now clearly has both feet in the future, whether it’s a growth platform for cloud, analytics, or high-value IT and BPO services.
I think this should be a comfort to IBM customers. Big Blue is taking necessary steps now to not become a Kodak and not consign itself to irrelevance for customers’ future needs.