Hi Gus, some observations. As far as a Palmisano regime, when Gerstner leaves there will be a lot of concern no matter what sector. Not that he is particularly weak, it is just that Gerstner is such a powerful presence. No one ever feels comfortable with Lou but Sam has a lot of friends since he grew up in the business. There is an edge to that which can't be duplicated with a Gerstner replacement.
I am more comfortable commenting on the high end disk sector (Shark) than anything in the low-end. When talking about desk-tops, desk-sides, laptops, etc. I think any model is fair game. If they can buy their drives with better advantage (cheaper, faster, better RAS, etc.) then IBM will do so in heart-beat. One wild card that is hard to measure since it is often not broken out is IBM's OEM business for drives. Historically, it is where IBM got into the OEM business. If IBM is not competing well with the other OEMs as your note suggests, then there will be no economy of scale and they may bag the whole deal and out-source it themselves. Basically what they did in networking with Cisco.
As far as RIFs, they continue both publicly and privately. Most anyone can cut a deal on a one-off basis. But usually untouchables are protected no matter what is going on. Disk knowledge can be transferred into other product sets such as processor controllers so if someone is truly exceptional that person will find a home somewhere within IBM. So I would discount what is being said on Yahoo.
I thought Seagate was taken private. It was a favorite of mine years ago.
Yield problems are one of the worst issues to deal with. Not only a productivity drain and manufacturing expense but maybe worse, the loss of sales revenue and profit due to perishable demand. And it is hard to explain even internally. Technology is viewed as a science, not an art form but when you grow silicon or take it to Master Slice you never know what's going to happen. Usually an early cycle issue when the opportunity for high selling prices and market share gains best present themselves. I am not attuned to any yield problems within the low end drive sector and thought that any that existed with Shark were fixed but don't know the latest on that.
It is still my impression that Shark is a formidable competitor to EMC's high end line. I am not up to speed on what EMC has planned for early '02 announcements but I am sure that EMC is planning something. Any comparison of the two product lines would be of significant interest to me. I think of the "Enterprise" market as Fortune 500 accounts using Server products.
On a different note, I think EMC has a lot of damage control to do with regards to their contracts and business practices. A few years back they won a significant percentage of the high end market through pure product superiority, not pricing or being easy to do business with. When IBM came out with Shark a lot of companies took the opportunity to rid themselves of this arrogance and switch vendors. I know it seems impossible to envision a company being more arrogant than IBM but EMC accomplished that in the mid to late 90s. That is a significant hurdle to overcome. All IMHO of course, and certainly open to dissenting views. |
