The company’s infrastructure division, which
includes its mainframe sales, declined 14.6% to
$3.6 billion in revenue. The drop was driven by
lower revenue from its Z Systems servers, which
were down 30%.
As goes Z Systems, so goes the company.
https://www.cnbc.com/2023/07/19/ibm-q2-earnings-report-2023.html
IBM’s problem is not with sales (They are just a little ahead of where the models says they should be at this part of the business cycle). The problem IBM is experiencing is a labor cost problem. Too many employees and managers getting over paid for the businesses IBM wants to be in. Given that they have migrated the company to services (approx 70% of the total employees are services related) the only way to take out costs is via removing labor. The labor that needs to be addressed is mostly concentrated at the band 10 and above levels. At least 40% of all band 10’s and above need to be removed as IBM is far far too top heavy. Gerstner removed 40% when he took over, and AK needs to repeat that performance if he truly wants to restructure IBM. If he doesn’t expect 2-3% growth going forward, as he has zero FCF to reinvest into the company
z = zero sales
LOL
There is nothing more to cut but employees...
They cut everything except executives salaries and bonuses. People should really be angry about this.
IBM has been cutting expenses for decades. From travel expenses to training to office supplies to employee equipment, all of that stuff was cut back long ago.
Seriously...what more could they cut?
They are cutting expense drastically besides their "silent" layoffs monthly. There is no new spend allowed for the remainder of 2023 unless critical or customer issue.
Long but informative article on the decades-long endurance of mainframe:
https://arstechnica.com/information-technology/2023/07/the-ibm-mainframe-how-it-runs-and-why-it-survives/
As goes mainframe so goes IBM Why
IBM’s major decision is how many lines of business do they wish to pursue as a niche mainframe company. Currently they are a 260k head count company servicing multiple mainframe and other lines of business. I expect them to shrink via spin-offs to a more focused 160k head count “niche mainframe” company. If you don’t feed the mainframe narrative Arvind doesn’t see a future for you within IBM
As long as there are high volumes of financial transactions that need to be processed, there will be IBM mainframes to process them. My own concern are the resources needed to build them, especially the chips themselves. There’s also an opportunity to make them more resilient, secure, and sustainable, especially as climate change intensifies over the next few decades.
I think the issue with our growth is our culture. Our focus on inclusion and collaboration is wonderful. I do wonder if it slows us down at times. There is certainly excitement about and rallying behind watsonx - but I wonder if we are so focused on foundation models and generative AI - that might be missing big picture of AI as a whole. That it primarily about driving workflow efficiencies so humans can focus on value-add work. As IBM continues to build the cognitive enterprise, my hope is that career paths do open up for those whose jobs have been mostly automated.
IBM and its Z LOB are what investors call a "mature business". There will always be a market for mainframes, just like there will always be markets for semi trucks and freight trains. It's not a growing market, but it continues to exist to accommodate the business environment. As long as taxes are being collected, worker pay is going out, credit and debit card transactions are being processed, and travel reservations are happening, mainframes will still be made and sold.
Just don't look for mainframes to be exciting for up and coming students.
It is always the same story... IBM struggles to raise revenue because they haven't innovated in decades. There latest watsonx stuff is very likely going to be a failure and will bring the company further to the bottom. As long as revenues do not go up significantly, IBM will cut costs, ie. it will keep on laying off people.
IBM is synonymous with the word "archaic"
Tere's not enough young capable people willing to learning the system anymore. Eventually, it will die.
30% drop in mainframe revenue less than halfway into the typical cycle. Maybe those 90s experts were just early.
I remember in the 90s all the "experts" saying Mainframes would soon be extinct. Yet here we are 30 years later and Poughkeepsie is still plodding along making mainframes.