There’s something telling (to me at least) in IBM’s earnings report. CNBC gives us this brief insight:
Revenue in services, IBM’s largest business segment, dropped 4 percent, but IBM was able to ink $17.2 billion in new services contracts. That was a healthy showing that demonstrates companies are still forking out for outsourcing and other technical support contracts, which are often viewed as moneysavers in the long run.
Hardware revenue fell 18 percent. Mainframe revenue fell 6 percent, and sales of lower-end servers based on industry-standard processors fell 32 percent.
“IBM has enjoyed certain attributes that other tech stocks don’t enjoy. They have recurring revenue streams that also translate into profitability,” said Keith Wirtz, chief investment officer for Fifth Third Asset Management. “That’s great for IBM and that’s one of the reasons why, in today’s uncertain environment, IBM’s a very attractive name to hold.”
Hardware and big cash outlay technical things aren’t going to work in the short term. There’s going to be very little investment in non-core development and experimental concepts. This is about function, utility and making it work.
Friends and peers ask me what I think are some strategies for online media and tech companies in light of all this. As IBM is doing… cut costs via software and services efficiencies. Pretty straightfoward. If you are worker, agency, contractor, employee that provides software services more cheaply than others, you’re going to do fine. The same was true in the dotcom bust. Those folks that could accomplish the work of 3 and not need a “top of line computer” to do it, maintained a healthy paycheck and a pretty decent workload.
This is the year of maintenance, not upgrade or investment. (look at Microsoft’s earnings or Apple’s.) Reruns, nights in, used cars, after market tickets, ebay…
Advertising will be in the tank for awhile.
Hardware will be in the tank.
Financial services built on non core purchase money will be in the tank.
Services that make it cheaper to live, work, travel will thrive. For developers and media people, it’s time to focus on service infrastructure.
This isn’t too tough. It’s about sausage making and if that isn’t sexy to you, probably best to take a vacation this year.
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