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e-commerce: IBM Insight? bannerlogo.jpg (2678 bytes)

 

Behemoths like AT&T, Microsoft    and Walt Disney , ... (are) carving up Web territory through alliances, acquisitions and well-financed startups.

    "GeoCities deal tests Yahoo's ..."  by  Dick Satran, Reuters: 29 Jan, 1999

 

Two days before Reuters published this article, IBM Enterprise Web Management team kindly sent us their e-commerce Report, highlighting important aspects of their Web-related efforts.

We applaud their impressive efforts, but it looks to us like the scale of all these undertakings still don’t compare with the above behemoths' endeavors.

      

Sleeping Giant Can Only Dream

Gregory R. Gromov and Louis Gray
Internet Valley, 22 Jan, 1999

 

According to the recent onslaught of television ads, IBM would like for all of its customers to be “ready for e-business”. But is IBM itself ready enough for the Internet age?

A few quotes from the IBM history timeline (post-1980)

Success story

When Apple Computer successfully pioneered its way into the consumer market with the introduction of the Apple II series of entry-level machines, IBM, adjusting from decades of manufacturing business mainframes, successfully answered back in the early 1980’s with its own personal computers that remain the industry standard.

Subsequent failures

When Microsoft launched its attempt to be a dominant force in the PC Operating System market with MS-DOS and subsequently Windows, IBM responded with OS/2 and OS/2 Warp, which while lauded by programmers, failed due to limited utilization of vast promotional resources under an avalanche of marketing efforts by Microsoft. To this day, it is still unknown exactly how a small company powered by a young William Gates first won the order to provide the operating system for the IBM PC family and a few years later was successful in toppling the industry giant in its own arena. IBM was eventually forced to discontinue work on OS/2, after billions of dollars were spent in its development…

In the mid-1990s, following Netscape Communications’ introduction of its Navigator web-browsing software, IBM did nothing to increase its presence in this fast-growing area. While Microsoft clearly feared for its future life, and began development on a competitor to Netscape’s Navigator in Internet Explorer, IBM totally failed to enter the Browser War, instead choosing to sit back and passive watch the proceedings. While about 3 years ago Gates declared that Microsoft’s next venue of attack was the entire World Wide Web, IBM again remained quiet, although it is again still unclear why...

Investor Relations

Partly the result of Microsoft’s charge into this field, and a near-monopoly on word processing, office productivity suites and operating systems, it is Microsoft who leads in Web influence Zone among top computer companies, not IBM.

Microsoft’s market capitalization to sales ratio (27:1) has become incomparably higher than IBM’s (2:1), bringing Gates' empire in line with Internet-related stocks that have seen their market capitalization rise dramatically.

IBM’s market capitalization clearly depends mainly on traditional models including Earnings,

ibm-ms31.gif (4040 bytes)

Per Share and quarterly sales for the company’s valuation hardly signs that the company is being taken seriously as a future Internet power ready for e-business.

Stocks of Internet-related companies have been the darlings of Wall Street for the past two years, as companies with low or negative sales margins are given market values comparable to traditional companies that have dramatically higher sales and earnings levels. The argument is that while traditional companies are evaluated on their year-to-year revenue and earnings growth, Internet-related companies, including AOL, Cisco Systems and to a degree, Microsoft, are rated primarily on their potential for growth in future e-commerce-dominated market, not only their current level of sales and earnings.

One of the brightest examples to what we have tried to clarify is the investors’ reaction to IBM’s most recent quarter report announced January 21st. IBM announced another consistent level of sales, posting $25.1 billion in sales in the fourth quarter of 1998, six percent higher than the previous year. Earnings were in excess of $2 per share.

Investor Reactions

Did IBM stock jump on this impressive news? Hardly. The stock instead fell significantly, nearly ten percent during 1/22/99 --  the day after the report’s publication, based on investors’ expectations that were not met by traditional criteria. So it appears that investors apparently do not yet have enough reasons to apply Internet market criteria to IBM-related financial news.

IBM may continue to tell other companies to join “e-business”, and increase their levels of Web influence. But IBM cannot be considered among the lofty ranks of Internet companies until they begin to demonstrate a real effort to increase their own Web influence levels, at least to the level that Gates promised investors more than three years ago.

Meanwhile, IBM’s CEO, Louis Gerstner, continues to keep his thoughtful silence...


Wall Street does not yet consider IBM a true force on the Internet, and our own research into this level of Web influence  has shown IBM to be only sixth among the top 100 computer-related companies now.

If IBM continues to ignore the Internet, it appears that the company currently sitting in first place in Web influence, Microsoft, may soon catch IBM in sales.

This is a proposition IBM should fear with its life as an IT industry leader, unless of course to give Microsoft the #1 position has been IBM's unspoken goal for the last twenty years...

 

  Do any of our readers have any ideas why IBM during  the last 20 years has provided  Microsoft with three incredibly valuable gifts: the use of MS-DOS, burial of OS-2  and WWW ignorance?

If you do, then please share it with us.

22 Jan 1999  we wrote
"Fearing that by remaining ignorant of the scramble for position on the Internet that they would miss out entirely, a number of immense companies are only now waking up to the idea that they face two choices: Get Web or Get Out..."

27 Jan 1999 we received the IBM's  e-commerce Report and
28 Jan 1999 --  comprehensive comments of IBM e-commerce director Scott Gannon

Questions | Suggestions | The Report | IBM's Say


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