Remember IBM? Big Blue used to do everything too, but then it suddenly got it. IBM unloaded its PC business to Lenovo and started focusing on the two things that were insanely profitable: Software and services. Oh yeah, the hardware is still there too, but IBM is all about enterprise and helping business get stuff done.

IBM’s public persona may have taken a hit with the average consumer–it’s not like Tivoli, Rational and IT services are discussed at picnics–but there’s no question it made the right move. IBM is more profitable than ever. And it’s focused.

I found this comment interesting:

Yes, IBM retained those parts of its business in which it was possible to obtain a huge markup and not worry as much about performance compared to alternatives.

Microsoft already has part of that approach, as witness the markup on software. But so far the company seems to be insisting on providing a worthwhile product for the money, even if it has to be compared to alternatives.

You might consider that a mistake, I suppose.

And then there’s Microsoft’s decision to maintain a large US presence, doing most of its main development within the continental limits. IBM has a much more ruthless idea, moving as much of its administrative structure as possible to China.

So, yes, Microsoft is only part of the way to IBM’s entirely exploitive and ruthless approach. Their progress is promising, I agree, but so far as far as products are concerned, there’s still too much there there.

“As we package chips on top of each other to significantly speed a processor ’s capability to process data, we have found that conventional coolers attached to the back of a chip don ‘t scale,” said Thomas Brunschwiler, project leader at IBM ’s Zurich Research Laboratory, in a statement. “Until now, nobody has demonstrated viable solutions to this problem.” Brunschwiler and other IBM researchers piped water into cooling structures as thin as a human hair (50 microns) between the individual chip layers to remove heat efficiently at the source. The 3-D chip stacks would have an aggregated heat dissipation of close to 1 kilowatt — 10 times greater than the heat generated by a hot plate — with an area of 4 square centimeters and a thickness of about 1 millimeter.

• Data agnostic. Diligent does not require content-awareness, format-awareness nor identification of backup software used to send the data. No special client or agent software is required on servers sending data to an IBM Diligent deployment.
• Inline processing. Diligent does not require temporarily storing data on back-end disk to post-process later.
• Scalability. Up to 1PB of back-end disk managed with an in-memory dictionary.
• Data Integrity. All data is diff-compared for full 100 percent integrity. No data is accidentally discarded based on assumptions about the rarity of hash collisions.

Fortune 500 rank: 15
2007 profit: $10.42 billion
Profit at the technology-services giant climbed 10% during 2007, driven by software sales.

A series of software company acquisitions made since 2003 added to IBM’s revenue.

Growth in Asia and emerging markets also drove 2007 results.

Nothing exciting here, but the recognition is always nice.

IBM and the Art of Acquisitions from Massachusetts based Xconomy, writes:

It’s a balancing act, but one IBM seems to have mastered, says Mike Weider, founder and CTO of Watchfire, a security company that joined IBM last year. “If you integrate too quickly you smother the fire that made [the acquired company] special,” Weider says. “But if you don’t integrate fast enough then you don’t leverage the synergies. I think IBM has figured out a nice balance between those two things.”

I found the article a nice read, though perhaps a bit slanted toward IBM (though the author maintains that IBM has a particular talent at this so it stands to reason that the article is flattering). Anyhow, my opinion has been that IBM has been growing a little bit too quickly and needed to chew a little more before moving on but maybe I’m off track.

Another quote I found interesting:

But synergies between products don’t mean much if the people who actually make them aren’t happy. So IBM says it puts a lot of thought into the human side of the acquisition equation. “You are acquiring the people—that is the asset in most of these cases,” says Hebner. “The code base, without the people who understand what it does, is not very useful. So we’ve put a much bigger emphasis making sure that the people are happy. We do a lot to make sure that we celebrate the culture of the company coming in. We actually try to assimilate things from them—and IBM has become a much more flexible place because of all these new people.”

I guess I only hear the squeaky wheels, but the feel I get is that in the US, morale is dangerously low. Perhaps that’s not the case in newly acquired divisions… I can’t tell that from my seat. Anyway, it’s worth 5 or 10 minutes.

Until now, the thought on the Street was that Check Point was going to continue as a stand-alone company, but with IBM on the prowl, it may be too much for CEO Gil Schwed to resist. Check Point currently trades at a market cap of $5.53 billion, and an acquisition would certainly come with a much higher price tag. Based on valuation, it would take between $7-8 billion to buy the company. For deep-pocketed IBM, that’s not too high a price. For Schwed, a takeover at that price would be tough to reject, and it would break all records for M&A of an Israeli company.

I think IBM has done a pretty decent job of balancing new acquisitions, integrating past acquisitions and organic top line growth over the past few years. Cognos will likely stretch and test that record because of the sheer size of the pill. The security firms rumored include Check Point, McAfee, Websense and SonicWALL. Websense and sonicwall are $900M and $450M respectively, and IBM has bought firms of that size with alacrity while avoiding investor rumblings. McAfee and Websense are north of $5B, making for (potentially) the largest ever target for big blue. I’m not sure that the time is right for throwing around such coin. Most acquisitions only enrich the acquired and hardly ever benefit the customer. Just slow down IBM. Digest for a little while.

I thought this video was a pretty entertaining intro to IBM and Second Life.

“On paper it makes sense. AMD needs IBM’s expertise,” Cohen said. “That said, I can’t imagine IBM, having exited many parts of this (chip) business, putting in the investment that would be required to catch up with Intel.” Among other things, IBM doesn’t want to alienate Intel, a longtime chip partner.

This just isn’t the direction IBM is wanting to go. They’ve spend a decade building their business around high-margin services and software — it wouldn’t make sense to deviate from that, even if it’s a good deal.