So Arvind bought RedHat for an astonishing $34B in 2019.
What was the return on this investment 4 years total so far? $2B? $4B? $10B?
Or is Arvind asking to wait 10 years to judge, just like Ginny asked for her smart planet, Watson, Weather company, Blockchain, Power processors, smart cities, and what else which I forget to list, all failed?
Is it possible Ginny will be missed after 10 years with Arvind?
Forget the thumbs, the numbers RedHat showing are horrible and AK has paid too much for those numbers. Such a mistake by the CEO 4 years after should lead to his forced to step down. That's all.
LOL OP now has -22 vote rating. Come awn IBM... You do realize that you are insane right?
Either you have a bot
Or, you're paying low wage serfs to do this
Either way, IBM, you look like mo--ns. I guess you never heard of subtlety. But you really do look like very bitter id--ts.
@3dig sorry no. You're confusing between net and gross margins. That article has nothing close to your 80%-85% gross margins. Are you hyping here?
I've explicitly cited NET MARGINS because this is the number which contributes to IBM's bottom line hence it's the return on investment of $34B.
Do you understand the difference between gross and net margins and what is ROI? I suggest you look it up.
Table from article:
2016 2017 2018 2019 2020 2021
Red Hat revenues $2,400 $2,900 $3,400 $4,012 $4,734 $5,634
Red Hat sales growth N/A 21% 17% 18% 18% 19%
Red Hat operating income $332 $472 $512 $602 $710 $845
Red Hat operating margin 14% 16% 15% 15% 15% 15%
Red Hat net income $254 $259 $434 $522 $615 $732
Red Hat net margin 11% 9% 13% 13% 13% 13%
Of course formatting is lost due to the limitations of this site.
FYI:
"Gross margin is the total percentage of gross income that is generated from the company's revenue. Net margin is the total percentage of net income that is generated from the company's revenue. The gross margin is larger in scope than the net margin because it does not account for administrative and selling expenses."
Also:
"Net margin is a company's overall profitability, while operating margin is a company's profitability from its core operations. Both metrics are important, but operating margin is usually more helpful in understanding where a company is generating its profit"
You can see in the table above operational and net margins almost the same around 15%
Read:
https://www.causal.app/whats-the-difference/net-margin-vs-operating-margin
https://byjus.com/commerce/difference-between-gross-margin-and-net-margin/
HORRIBLE HORRIBLE BUSINESS!
Ginny bought Softlayer cloud for $2.5B after failing to develop an in house cloud, where Research was useless. Arvind has taken over as a Sr VP the IBM Cloud business unit and ... Failed all development... Buried it! Just like he's failed as STG development General Manager with Power, System X, and the fab all sold or will be, Power, soon it seems. Arvind was the Sr VP running Research and... IBM lost their supecomoiters business AKA Blue Gene etc many failures.
So Ginny wasted $2.5B now Softlayer gone and Arvind wasted $34B on RedHat ... Soon to be destroyed...
Numbers don't lie.
3dfr You need to read your article You are quoting net margins. RH has gross margins in the 80-85% range.
Funny indeed there are either social media agents with a job to thumb down unfavorable posts to IBM or a bot. Within 3 minutes from posting my comment bellow, 10 thimbs down hit. Impossible for humans to read a comment so fast unless this thread is "watched" by IBM. It's a smart bot not exaggerating with too many thumbs down depending on time and thumbs up. But 100% it's an artificial action. Good... IBM is noticing lol. Of course thumbs have no effect here. But one cannot apply multiple thumbs I guess unless they clear the session cookies. So this is intentionally done.
Congratulations all... IBM's noticed and most posts on this site are obviously negative to IBM though I've seen a few praising IBM's great "strategy" etc - social media agents paid jobs?
Keep doing thumbs down IBM, the most a post has the better it is for all to read!
@3xad Posts are correct - the net margins numbers, which are the ROI on $34B paid, were summarized in the table in this article through 2021:
https://www.lightreading.com/service-provider-cloud/red-hat-is-bright-spot-in-dreary-ibm-picture/d/d-id/777592
No 80% margins at all as you can see max was 13%.
Since you're staying 80% margins which you think, but it's actually much less as above reference shows, obviously it's a bad business.
As for growth, check the last quarter RedHat missed revenues growth instead of 15% only 11% so 4% short. No this isn't $1B growth otherwise you think there revenue is $10B to grow $1B or 11%.
Check your facts it's not about your thinking it's about citing earning results and numbers.
I think some of the posters are confusing growth with margins. Redhat had 11% growth year over year. The margins on Redhat are far far greater than 12%. Redhat is growing at approx 1 billion per year, generating approx 6 billion in revenue for 2023. That revenue has an approx 70-80% margin
It's funny as IBM has offloaded other businesses with much higher margins than RedHat 's 12% no? IBM cannot survive with such low margins and so high debt. It's a bad business I think.
Layoffs at RedHat after this comment was posted earlier today. Coincidence? And so it starts. 800 poor souls going out to improve margins at RedHat out of 20000. But that won't move their margins needle much as a software company their margins are at 12%. Net earnings won't even pay for the interest on the $34B debt IBM's taken in 2019.
Great job Arvind well done. Yes that's it, layoff more people while lacking any leadership to justify your keep.
Disgusting.
@2azo+1mgsk9Mp give Arvind 10 years like Ginny had and you may change your view that Arvind is worse than Ginny.
While Ginny has destroyed IBM, Arvind is doing IBM's funeral... Selling parts left and right, laying off workers and getting no real growth. Is that a vision worth his big pay to say AI and hybrid cloud? Ha! This is everywhere now, IBM's late to the game just like it messed cloud while Amazon, Microsoft and Google we're leading. Just like it messed fabs technology forced to pay Global Founderies to agree to take the fab while TSMC is greatly prospering. Just like it messed up both System X x86 and Power, while AMD is in two of the exascale supercomputers. Etc so many failed leadership.
AK will be worse. He's the emperor's new clothes tailor and the emperor is the BoD and Wallstreet... But we know how it ends. Cannot fool all people all of the time.
Check Arvind's past roles in cloud and research and as GM of Power development and the IBM fab development ... Enough said..
@2xen yes RedHat has customers not $0 revenue but it wasn't worth paying $34B for. Big loss as RedHat won't provide the big drive for IBM's growth Arvind is hyping.
Numbers don't lie. Software business with a 12% margins is a horrible business especially as it carries a $34B debt
Arvind hyping new buzz words. Hybrid Cloud? Ha! It has been done for a while nothing special from IBM. Is this a codename for RedHat? AI? Ha. Is this a codename for Watson leftovers? Common Arvind. Or maybe Quantum Computing will save IBM? Ha. What has come out of Research in the past decade or two which saved IBM? Oh yes.. Watson, Blockchain, and now Quantum? They failed even in supercomputers the past pride of Research is no more.
Sorry but Arvind has made a huge mistake or a few, hurting IBM way more than Ginny has done in 10 years.
Remember Ginny hyping style - nothing ever materialized let's be real. Same hyping style used by Arvind now. Want to wait 10 years leaving Arvind as CEO getting loads of cash before he is fired?
I hope an activist investor will take on the board and Arvind ... This year hopefully is his last.
I have to disagree slightly with @2mds+1mgsk9Mp
"that pales all of Ginny past doings."
Ginni destroyed this company with RoadMap 2015. That was setting records like Tom Brady or Lebron James sets records.
I have no dispute with any of the rest of the post.
Whenever I read IBM's numbers, I think about three things:
@1htk we've been in this movie before... Remember how Watson had fantastic growth in revenues each year... Until it was discarded and sold... There's a lawsuit on misstating revenues taking legacy mainframe and counting their revenues for Watson and cloud 8f I remember correctly.
Check the margins to see the true story since 2019... Revenues double and triple, on a software product, and margins are 12%?! Are you kidding me? Net earnings are tiny.
Had you invested $34B, the interest would have been higher than RedHat net earnings! Remember IBM took debt to pay $34B for RedHat. The interest on that debt is higher than what RedHat net makes. It's a disaster deal for IBM in my view! Arvind should get an F on his performance scorecard. 4 years is enough to see this is a huge flop.
Don't be fooled by the negative pathetic thumbs down on this post. Who read this message board to think highly of IBM business and thumbs down many posts? Yes it's hired by IBM social agents? Laughable as the thumbs mean nothing. Numbers talk and Arvind made a colossal mistake that pales all of Ginny past doings.
Watch RedHat margins at the link posted bellow to see the facts. Doubling and more revenues with constant margins means legacy products revenues added in my view!
Why all the negative responses (red) when this is factually correct?
@wgc The .4% revenue growth was for all of IBM (including poorly performing legacy). Redhat grew 11% in first q.
QUANTUMS AI powered by Watson served on hybrid cloudz Gonna save ibms
@wgc+1mgsk9Mp it’s been roughly in that range until 2022 (15% in 4Q) and it’s only this quarter where it’s had a shocker. But my point is that even the previous growth since acquisition is not a big enough contributor to the bottom line… given what was paid for it
@fuf what "16-19%" revenue growth? 1Q had just 0.4% growth vs 1Q2022, forget constant currency nonsense. IBM's cut 2023 growth down to 6-8% ... Obviously "in constant currency".
Horrible. Arvind was praised as the genius behind buying RH forb$34B while analysts wrote it was paying too much. And nothing to show for it after 4 years? And he's a CEO still?
Only at IBM "executives" are rewarded for failures....
Forget the other nonsense like Quantum Computing... Going on in "Research" for what? 8 years? And new Arvind talk about AI, without saying Watson is laughable.
Let's see if Arvind will stay 10 years as CEO like Ginny before "retiring"....
FWIW, this article does a good job in separating out the RH numbers:
https://www.lightreading.com/service-provider-cloud/red-hat-is-bright-spot-in-dreary-ibm-picture/d/d-id/777592
Well, the revenue growth, whilst in the 16-19% region, nor the net profit growth is going to save IBM. It doesn’t seem to me that the RH growth is helping grow blue revenue in other areas either.
I’m reminded of when RH were about to join IBM, there was a very interesting “tell” in a fireside chat between Ginni and JimW. Ginni implied RH (and RHOS) would be a significant growth engine. Jim’s face was a picture. He said something like “it’s very early days for RHOS” . That’s one factor why I couldn’t buy into the Cloud Park strategy/koolaid and chose to leave IBM.
My theory was Jim walked because he knew RH would eventually get blamed…