Digital Trends

Now that the US government has resoundingly approved the IBM-Lenovo deal (which, if rejected, would have required an explanation as to why the flow of technology into China for years suddenly was improper), we get to see the full impact of the deal.  Initially, Dell and HP will probably be the greatest beneficiaries, as the two units go through the merger process and seek to address the concerns of long-time IBM customers.  But the long term beneficiaries may be Oracle, Microsoft, Intel, VIA, and AMD.

The IBM corporate exposure

IBM is a large holding company that over time has developed an array of highly restrictive rules on the business units it controls.  These rules, which have to do with the ill-advised practice of management through massive policies, was largely the cause of the company's near collapse in the 1980s and contributed strongly to the failures of the printing and storage divisions that were spun out earlier.  The remaining core units of large systems, software, microelectronics, and services still reside under this oppressive umbrella. 

While this was one of the problems that IBM's previous administration, led by Lou Gerstner, had promised to solve, with this divestiture, it is now clear that he and his team largely failed in this effort.   This may mean that where the IBM PC division goes, others will have to follow.

Software division

Interestingly, the IBM Software Division has long bridled against these oppressive IBM policies.  Decades ago, software engineers refused to wear the white shirt and conservative ties and jackets that were the IBM ‘uniform" of that era.  When they found IBM's own centralized services less than responsive, they started their own internal units and remain one of the most independent of the IBM divisions today.

Still, studies done in IBM at the turn of the last decade clearly indicated that IBM could not compete against either Microsoft or Oracle long term.  IBM Software has begun to slip behind both Oracle and Microsoft, which have been able to more aggressively acquire companies and technologies. 

IBM Software uncharacteristically supports the Open Source movement in general and Linux in particular, which undoubtedly creates massive friction between the unit and many of those at corporate headquarters—the latter are from the old school, which advocates anything but the sharing that is now not only recommended but required. 

Due to the string of divestitures, the separation from IBM for IBM software is now once again on the table, particularly given that those who blocked the last separation attempt are gone and the connection between the hardware and software is now even more tenuous than before.   

It shouldn't be hard for either Oracle or Microsoft to tell this story and point to a string of actions by IBM's current administration that would result in the sale of the unit.  Software at this level is a long-term commitment.  Many still remember IBM's broken promises on OS/2, some of which were made after they had decided to discontinue the offering, and will recall that while they were negotiating the Lenovo deal they remained "committed" to the PC Division.

Trust is IBM's greatest asset; breaking that trust relationship has become much easier for companies whose ownership isn't in question.  Both Oracle and Microsoft lead that list and may now benefit if they can act on this obvious opportunity.