I was trying to simplify, but let's talk about prospects in detail. We'll need to talk about growth rates and market sizes, as well as margins and market share. So, let's.
My previous chart:
$B revenues/pre-tax income
2001 2000 1997
Hardware 33.3/1.3 37.8/2.7 36.6/4.5
Services 35.0/5.2 33.2/4.5 25.2/2.9
Software 12.9/3.2 12.6/2.8 11.1/2.0
Finance 3.4/1.1 3.5/1.2 2.8/1.1
Details for hardware:
2001 2000 1997
Hardware
Technology 8.0/(0.4) 8.5/0.7 11.1/1.8
Clients 12.0/(0.2) 15.1/0.1 14.3/-0.2
Servers 13.7/1.8 14.2/1.9 11.3/2.9
Total 33.7/1.3 37.8/2.7 36.7/4.5
(yes, I know the totals don't quite jibe; I'm pulling the numbers from Bernstein and from IBM's '99 10K)
How shall I parse this? Given events in the market, I'm going to grossly oversimplify and do both a one-year and a "3.5 year" averaging 2000 and 2001 numbers (yes, yes, it's ugly, but it's a start). We get:
annualized %growth rates, revenues/pre-tax income
2001/2000 00-01/97
Tech -6.4/ - -8.1/-50.7
Client -20.6/ - -1.6/ -
Server -3.2/-4.8 6.3/-11.7
-------- ----------- -----------
Hardware -10.9/-51.8 -0.7/-20.9
Services 5.4/14.2 9.0/15.5
Software 2.7/13.4 3.9/11.5
Finance -1.3/-2.8 6.0/0.7
So: 2001/2000 sucked for hardware (we knew that), but sucked least for servers/mainframes. Long-term hardware trends, even adjusting for the '00 bubble/'01 collapse, look down -- really down -- except for the server top line. Now, if IBM couldn't raise margins in bubbly old FY00..
You've suggested that the exit of other players from the mainframe field is going to boost margins here. Maybe so; mainframes are an area out of which other companies are fleeing. Now, I don't usually take that as a great sign for long-term market viability, but I'll withhold judgement. Have any data for us?
Services, as I said before, have grown very nicely. Your point about software is well-taken, and also looks like a solid pocket, if not the source of strength services represent. Finance, I believe we agree, is ancillary.
Next step? Talk to me about what's going on in the server market. Any reason aside from logic to suspect server margins are on the rebound? Any reason to believe tech/client lines are headed for an inflection point? I'll think some more about software and services.
-mb |
