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IBM Sells Point-Of-Sale Business To Toshiba
ErichTheRed writes "Yet another move by IBM out of end-user hardware, Toshiba will be buying IBM's retail point-of-sale systems business for $850M. Is it really a good idea for a company defined by good (and in this case, high-margin) hardware to sell it off in favor of nebulous consulting stuff? 'Like IBM's spin-offs of its PC, high-end printer, and disk drive manufacturing businesses to Lenovo, Ricoh, and Hitachi respectively in the past decade, IBM is not just selling off the RSS division but creating a holding company where it will have a stake initially but which it will eventually sell.' Is there really no money in hardware anymore? "
I doubt most /. readers even knew IBM had a POS division...
As it has done with Lenovo and the other manufacturers, the quality will decline.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
I can't make heads nor tails of these big purchases any more. Valuing things like this looked easy in college. Maybe I am getting ancient.
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I think this is a good move. I suspect IBM used to do good business with POS by selling AS/400s, etc. as backend systems. But now? It seems like it doesn't really fit in with their core businesses.
As an ex-ibm employee I should hope they trip, fall, and die... but I own to much stock in the company... so party on.
This is why they have a buyer.
But their consultants will look more honest when they go out shilling Toshibas POS systems, and they still have their slice of the pie. They wont be baking it, just slicing and serving.
When IBM sold Lenovo to Taiwan it worked out great since they basically still run Lenovo as "consultants" so even if laptop sales tank they still get paid for their work running the company while the Taiwanese have all the risk. If this one works out the same way then it's all good. Plus since technically Lenovo is owned by Asians if everything is made in a radioactive sweatshop IBM isn't going to get any blowback the way Apple does. IBM's middle name is "Business" and it shows.
Is it really a good idea for a company defined by good (and in this case, high-margin) hardware to sell it off in favor of nebulous consulting stuff?
Oh yes indeed, if the margin on the service side of the business is larger than the hardware business it makes loads of sense. Put it this way: it's cheaper for IBM to buy Lenovo PCs for its engineers and consultants than to build them itself.
When all you have is a hammer, every problem starts to look like a thumb.
They're still the largest manufacturer of mainframes, who are they going to sell that off to?
Lenovo was bought by a People's Republic of China (i.e. mainland) company, not a Republic of China (i.e. Taiwan) (Of course, it is kind of a moot point because both official claim that there is only 1 china, but...)
In my opinion there is a lot of money in hardware. Something else is wanting in most of Europe and perhaps North America. The will and enthusiasm to work physically with ones hands. And hardware is at the bottom line a physical thing.
We tend to talk about cheep labor, an expression which degrades labor in general when used so often. And so we end up with a lot of decision makers and wall-streeters who have no regard for physical things in general. Decisions will be made in favor of offices instead factories and money will flow to offices instead of factories.
As we can see in the example of China (owning a large part of the US) there must be money in hardware.
Germany, as an exception to the rule, seems to do quit well producing hardware but in general it is below our dignity to make our hands dirty producing something and this is the reason hardware returns little money in our culture.
Makes perfect sense because IBM has not been a consumer company for quite some time now. They are as much a "good high-margin hardware company" as Apple is a set-top-box manufacturer. Sure, they essentially brought the PC to market, but those Model-M keyboards /.ers love and the Thinkpad division they dropped years ago were already then tiny slices of their business.
There's no innovation left in POS. It's a solved problem. IBM makes their money as an extremely large scale systems innovator. That's what they're good at, and that's what they can market well. At this point, the only innovation happening in POS is wireless/mobility use, and there are countless tiny little startups cornering that market via iOS and Android apps.
Build cash registers is a commodity market and essentially a race to the bottom. IBM is smart for selling off this business segment while it still has value, and focusing on the big systems and big data that is their core business.
Would you rather that IBM operated on the MS model? They could buy everything under the sun and have incredible research, but then do a shitty job trying to manage and integrate across their product lines and business services. Or they could go the Xerox route and not put any of their cool research into anything usable.
No, as both a shareholder and a consumer who has respect for the brand, I'm glad they can focus on what works for them, and sell off divisions that are in stagnating industries that no longer benefit from the innovation focus they've had for the last 100 years. I don't see anyone here complaining that they sold off their typewriter division (thus forming Lexmark).
I'm out of my mind right now, but feel free to leave a message.....
International Business Machines no longer seems appropriate. Maybe IBHA, International Business Hot Air?
Posting anonymous for obvious reasons.. but their Software Services are a joke. I've worked for and with IBM for several years. Their GBS (Global Business Services) department is a joke. I've seen multiple failures to deliver on time, and most often they go over budget or get canceled by the client. Somehow they still manage to survive. They also refuse to train these "experts" and charge the client $280/hr for someone to warm a seat.
In addition, their software is pretty bloated and over-architected. While working with them on customer sites, either they were a WebSphere Shop (used to it), or they were coming from another technology. Those coming from the LAMP / .NET realm were frustrated at the amount of resources required to process requests, sessions, transactions and the like. The development enivronment (RAD) eats up 1.5 gigabytes easily, and the web-application/portal server eats up easily another gigabyte.
I don't see how they can simply rely on this type of software and services in the long term. It's truly sad to see them eliminate yet another hardware division. They seem to do better with hardware.
Quality won't drop as suggested - little known fact Toshiba TEC make a big chunk of the POS hardware already for people like IBM, NCR etc.
Is when Toshiba makes the purchase, will it be credit or debit?
Note that one of IBM's first products in 1911 was a commercial scale. Since supermarket POS systems usually include a scale for weighing produce, this ends a century of IBM selling weighing devices.
This really reminds me of Pfizer- selling all the cash cows off (household products developed in-house- Listerine, etc etc) that were pure profit. Next step, closing down all research (= new prod development).
Final step, call it toasted and done.
Of course, the Senior Management make a profit at each step- clown shoes flapping all the way to the bank.
There is no money in hardware. I found out the hard (stupid) way.
A hardware engineer with a PhD gets paid, entry, 100-110k on average.
A software engineer with MS get paid, entry, 100-100k on average.
A software engineer's work experience accrues without much 'expiration' date - this is more true as you move up higher in abstraction (so I'm not talking about firmware software driver guys, although they should be damn good at C/C++ which helps with getting into other things).
A software engineer can be an entrepreneur: see: Youtube founders out of Ebay, fresh-out-of-college grads. Software initial cost is almost 0.
A hardware engineer cannot be a real entrepreneur. He has to battle a mine patentfield (yeah, same for CS but usually you can get acquired quickly) and huge initial costs. Tools licensing is astronomical. A industrial grade SPICE license + Synthesis + Layout + P&R tools + etc will cost in the hundreds of K, if not hitting a million.
A hardware engineer faces huge elimination by being too close to the transistor level. A switch out of the BJT into MOS probably destroyed many engineers' accrued knowledge in one fell swoop, quickly. Similarly, the impending switch from MOS into double-gates will destroy many IC engineers' accrued knowledge just as quickly.
The same cannot be said for CS, as most of it can be abstracted quickly, and boils down to algorithmic practices which do not get outdated.
Laundry Iphone apps, Stupid dinky games, and apps to help you count how much you fart get millions in funding, while hardware startups flounder to get by (hence preventing others from even thinking of entering the HW game).
Yet, a HW guy (EE Major) has arguably the same skills, foundation, and fundamental knowledge as SW guys (CS majors). Its really just that EE guys don't like doing CS, but they could do it easily. I went to a top-tier uni with EECS as a combined major (and this is common at the top uni's). I can tell you the top EE guys aced their CS classes easily and beat out the top CS guys or were on par.
Why are we paid less? Yeah yeah low margins, blah blah. Well, f* this. I'm taking a stand and telling the ENTIRE next generation of EECS majors to do CS only. There is not much left in EE for the hard workers to do well in, other than work forever for CorpX earning less than CS majors, while doing the same workload with the same skillset. F** this.
Has gone down the tubes, unless you can sell LOTS you wont make a dime.
The Chinese will eat you alive.
I don't expect Dell to be doing it much longer either.
---- Booth was a patriot ----
I wonder if they may be betting that the market for point of sale systems will diminish as stores like Borders and Circuit City go bankrupt in favor of online retailers like Amazon? Possibly better to sell now before that happens.
Why does the poster refer to consulting as "nebulous"? IBM has been making more money off of consulting and software than hardware for a long time, and their strategy is clearly to push their services division. Nothing here is a surprise.
Secondly, the question "isn't there any money in hardware anymore?" is asked. Nodoby said, or even suggested that. In fact, if there was no money in it, you can bet Toshiba wouldn't be interested in buying the business. The fact is, hardware generally has low margins, but is reliable and stable. Software and services tend to be higher margin, and higher risk in general.
Wasn't it some stuffed shirt at IBM who told Bill Gates he could have the (dos) software...because the real money was in the hardware?
IBM is a long term player. Microsoft had a good decade in the 90s but they've been flat for 5-10 years now. IBM had some lean times in the PC era but that's behind them. I'd bet in 2050 IBM will still be making loads of cash meanwhile Microsoft will be a minor player or defunct.
As far as I can tell, the majority of IBM's point-of-sale systems these days run Linux with the older FlexOS based systems now a small fraction of the installed base. Can anyone confirm?
When all you have is a hammer, every problem starts to look like a thumb.
Of course there is no money in hardware anymore; haven't you been watching the valuations of hardware companies sink like a stone over the years? Hardware companies have no value; this is confirmed by the stock market indices. Try and name a highly valued company that makes hardware. Online pet food is where the money is....
ps: The quoted Subject: line demonstrates remarkable progress in sentence construction. Keep up the good work.
Apple seems to make a lot of money making hardware. Isn't that their goal? Use software to sell their hardware.
Except for ending slavery, the Nazis, communism, & securing American independence, war has never solved anything.
the new CIO, Virginia Rometty was the executive that brought IBM into the services era.
I would have to say the biggest driver of IBM hardware sales is the service arm. While they will accept anything as part of a DataCenter move, the refresh cycle is geared towards replacing with IBM hardware. The lower cost and maintenance schedule usually seals the deal. So really the only hardware that makes sense is midrange to Mainframe. Commodity is right out.
From the Q1 financial report this afternoon:
http://www.ibm.com/investor/1q12/press.phtml?lnk=w3
Systems and Technology revenue down 7 percent, 6 percent adjusting for currency; -hardware
vrs
Software revenue up 5 percent, 7 percent adjusting for currency;
Services revenue up 1 percent:
Services pre-tax income up 11 percent;
Total systems revenues decreased 6 percent (down 6 percent, adjusting for currency). Revenues from Power Systems were flat compared with the 2011 period. Revenues from System x were also flat. Revenues from System z mainframe server products decreased 25 percent compared with the year-ago period. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 5 percent. Revenues from System Storage decreased 4 percent, and revenues from Retail Store Solutions decreased 13 percent year over year. Revenues from Microelectronics OEM decreased 13 percent.
Posting AC as I am a sometimes contractor there.
I haven't bothered to look through the 2011 annual report yet, but 2010 the plurality of revenue was from software and the majority or profit was from software (The bulk of that being branded software).
Increase your overall margins by ditching the parts of the business with low margins.
And you might say "Well, it'll hurt services revenue and profits." Except IBM Credit Corporation was 2nd place for revenue and profit.
I'll miss it. I had a neighbor that worked for IBM back when their business was scales and time clocks for hourly workers. Early in my career I helped pack systems that went to retail trade shows. But I kind of knew the writing was on the wall when I worked for a grocery store and the order based coupon printers appeared as any brand other than IBM. The credit card terminals became any brand other than IBM. The only reason scales briefly went back to IBM was because they were among the first on the market with combined scanner/scale.
I worked in IBM's hardware division for over a decade before I (voluntarily) left, so I know what it's like there.
The problem isn't hardware, there's plenty of money there, just ask Intel, Broadcomm, or TI.
IBM's problem is IBM. Look at the SEC 10K filings for IBM and you'll see that IBM has the highest SG&A expenses (sales, general, and administrative) of any tech company, and has had that for 40 years. That means that IBM's legendary internal bureaucracy and management wastes far more cash than anybody else.
When you look at the SG&A you can see why IBM's present strategy is almost forced on it. Since their internal structure burns cash at a terrific rate they need to find lower risk, lower expense projects. That pretty much means software where you don't need to invest as much money in infrastructure (semiconductor fabs run $3B+) and where a dumb decision (an upper level IBM management specialty -- the PPC615 would be a classic study in mismanagement if they'd ever admit details about the development, but I saw it firsthand) doesn't cost as much. And when you can replace expensive US workers with off-shored workers you lower expenses still more.
IBM: Hi Toshiba, Would you like to buy our POS business ?
Tosh: Wow, yeah !
** money changes hands
Tosh: This business is a total POS !
IBM: Haha
while (true != false) process_more_stupid_code();
Ummmm, IBM will do what it can to increase profits and shareholder value. If that means getting out of ICT and into a string of hotels and vocational schools, then so be it. Oh, right. ITT already did that...
Shoes for Industry. Shoes for the Dead.
Yeah.... A good friend of mine worked for a POS installation and support company for years, and he always said the real money was in the support, just like most situations with computer equipment.
With IBM's high markup for their POS hardware itself, I'm sure it was profitable to sell it ... but the vendors doing the installation and selling the maintenance contracts were doing far better than IBM. IBM only profits once, when the new equipment is sold, and after that, maybe an annual cut from vendors who pay IBM for a service agreement (and ability to download fixes and updates to the OS on the hardware). But the vendors just turn around and ask their customers to pay that, PLUS whatever they tack on, and they profit every time a client needs a change made to their POS system.
The thing about POS is, the BIG players have their systems all figured out and working well for them. (He always said McDonalds was a shining star of an example of how a POS system SHOULD be configured and implemented to maximize profitability.) But 99% of the POS customers out there aren't mega-corps. You've got all the corner bars and hair salons and independent car repair garages where the only person who cares about the POS system is the owner, and he/she is typically not a "computer person". He/she knows a POS system is pretty much a business requirement, but even if you leave all the instruction manuals on-site and give them full access to make changes -- they're simply not going to spend the time to mess around with it. Bars and small restaurants live or die by inventory management. They can go from highly profitable to losing money in a month if some food is wasted or too many drinks are "over poured". Yet, most of the time, they've never delved deeply enough into their POS system to get it programmed so it calculates things like ground beef purchases and resale/spoilage down to the ounce. They could -- but that's where they need vendors to give them that ongoing support.
But 99% of the POS customers out there aren't mega-corps. You've got all the corner bars and hair salons and independent car repair garages where the only person who cares about the POS system is the owner, and he/she is typically not a "computer person".
Of course, that was never IBM's market. IBM couldn't figure out how to sell to Mom & Pops if they wanted to. IBM's definition of a "small business" is one with annual revenues of less than $4 billion.
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
To suggest that IBM is dumping all hardware business lines is inaccurate. IBM is staying in hardware, they just aren't staying in commodity hardware. IBM's Watson and its derivatives are examples of the type of business they are keeping and trying to develop. They will leave most of the low-margin commodity business to others while they research and develop new technology to exploit. This strategy assumes that they can develop something that will be commercially viable, of course. Will that happen? It appears to be a risk they are willing to take.
it probably just works http://squareup.com/receipt-printer-and-cash-drawer
it doesn't matter if it does because everyone is going to buy one