Jonathan Schwartz is a wonder. Here he is, one of the head honchos at "Red Ink 'r Us", and he's telling us that IBM is in trouble. Hmm. From IBM's latest earnings report:
ARMONK, N.Y., July 15, 2004 . . . IBM today announced second-quarter 2004 diluted earnings per common share of $1.16 from continuing operations compared with diluted earnings of $.98 per share in the same period of 2003, an increase of 18 percent. Second-quarter income from continuing operations was $2.0 billion compared with $1.7 billion a year ago, an increase of 15 percent. Revenues from continuing operations for the second quarter were $23.2 billion, up 7 percent compared with the second quarter of 2003 revenues of $21.6 billion.
And Sun's latest report?
Sun Microsystems this week reported a profit of $US795 million or $US0.24 per share in the fourth quarter, compared with a loss of $US1.039 billion or $US0.32 per share in the same quarter of last year. Total revenue for the quarter, which ended June 30, was $US3.11 billion, up 4.3 percent from the year-earlier quarter, Sun said in a statement. Sun's profits were buoyed by the nearly $US2 billion it received as part of its legal settlement with Microsoft earlier in the quarter. Discounting the Microsoft money, Sun reported a net loss of $169 million or $0.05 per share.
That's right - had MS decided not to create another charity case, Sun would have had yet another consecutive red quarter. With that as a premise, let's see what brilliance Schwartz is brimming with today:
A few years back, IBM and HP both hopped onto the social movement called linux. It's a wonderful movement. But the bad news for IBM is that the vast majority of enterprise datacenter deployments are now occurring on Red Hat's linux. 100 to 1, depending up on where you look. And with Red Hat increasing price, while adding in an application server that competes with WebSphere, IBM's finding itself in the uncomfortable position of having lost control of the social movement they were hoping to monetize. They're beginning to look like the IBM of Mr. Akers's era - having missed the forest for a tree, and finding themselves without an operating system.
IBM has been among the most aggressive (and ironic) in positioning itself against the world of "proprietary" technology - in stark contrast to its history as the world's most pernicious patent litigator. It's against that backdrop that IBM brags about its "thousands of programmers working on linux." But ISV's can't build their business on a social movement - they have to pick a base software distribution and web service stack. And with most enterprises having picked Red Hat on IBM's recommendation, IBM now clumsily realizes it's invited the fox into the hen house. With Red Hat running on the majority of IBM's proprietary hardware, Red Hat can now direct those customers to HP and Dell. Even Sun.
It's amazing to me that he gets paid for this level of obtuseness. Sun pretty much created the shovel operation that plows money to IBM - Java. IBM has nearly half the application server market (to Sun's just about nil) - and Schwartz wants us to believe that IBM is in deep trouble, while Sun is all set to cruise forward on the commodity rails they've set up. Dream on. Here's the gist of the delusion that Schwartz has set himself:
IBM is in a real pickle. Red Hat's dominance leaves IBM almost entirely dependent upon SuSe/Novell. Whoever owns Novell controls the OS on which IBM's future depends. Now that's an interesting thought, isn't it?
Yeah, right. Last time I looked, IBM was happy to sell you Websphere (for huge gobs of cash) on just about any platform you wanted it on. Sun is the company that desperately needs you to have a Sparc box running Solaris; IBM just doesn't care. We (the Cincom Smalltalk team) are in the same position (so far as concern, that is) - VisualWorks runs everywhere, we don't care what hardware you buy. Ditto IBM (on a much larger scale, obviously). Ironically, what's the main reason that IBM can not care about the hardware - Java. Who created the commodity space that shovels money at IBM and away from Sun? Oh, that would be... Sun.
Keep whistling past that graveyad Jonathan. At least you're entertaining the rest of us while you do it.