Truth about Intel and IBM

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If you don’t read Alan Abelson every weekend in the Barron’s, then you must. The man is a legend; has a sardonic style laced with arsenic wit. For instance in this week’s edition of his column, Up and Down the Wall Street, he informs us that while the US Congress was slashing $105 million in funding for National Science Foundation, at the same time it was approving expenses for such frivolous but apparently important efforts such as a study of Wild Turkeys, hot houses in Arkansas, and of course a Nordic Ski Resort in Alaska. Nevertheless his column has some gems about Intel and IBM, courtesy of Fred Hickey, who authors “The High-Tech Strategist”.

Hickey says Intel cut its revenue target for the year by $450 million in September 2004, and then slashed them again in mid-October. But a few weeks later it raised its fourth quarter revenue estimates by $400 million. Its revenues and earnings are still going to be lower than expected, but Wall Street rejoiced.

People, context is all we ask. Hickey then turns his poison pen to IBM, which has decided to exit the PC business. (Business Week, China Goes Shopping!)

Hickey points out that IBM has now successfully gotten out of printers, disk drives, semiconductor memories and networking equipment, because it could not make money from them. Result, the company is completely focused on services. Now that would be good, but as Hickey points out IBM’s Global Services business is a bit rocky — “bookings have slowed rather sharply in the opening three quarters of 2004 and backlogs have fallen by $10 billion in the last two quarters. A recent issue of InformationWeek magazine surveyed more than 300 IT execs and asked them to rate the 12 largest outsourcers. IBM ranked dead last in every category but strategic advice, where it wound up next to last.”

Hmm, that makes me pause and wonder about a lot of things.

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