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580 posts categorized "Tech/ computer news"

March 31, 2014

Lots of construction cooking at Big Blue

Lots of construction is in the works on IBM's sprawling Rochester campus.

IBM buildinglogoSome final work still is underway in buildings 333 and 002 for Charter Communications. The cable-television provider is leasing those buildings to house an estimated $3.5 million expansion of Charter Business, its business-to-business division.

Charter says the expansion will add more than 140 jobs to its Rochester operations. The company is planning a ribbon-cutting ceremony for April 15 in Building 002 on the IBM campus.

While neither Charter nor IBM are discussing it yet, a permit also has been submitted to the city planning department for interior demolition of IBM's Building 005. Charter-business-logo

The permit describes the demolition as preparing the building for "Future Charter Business."  The value of this project is listed as $3.25 million.

Without information from Charter or IBM, it's unclear what this permit signifies. However, Building 005 is connected to Building 002, so it's possible Charter needs more space for its expansion and it possibly is leasing a third building from IBM.

HgstLook for more details about this project in the near future.

Meanwhile, HGST has construction of its own cooking in one of the buildings it leases from IBM. Western Digital's HGST, formerly owned by Hitachi, is working on a Crossfit workout center and locker room. That project is valued at $325,900.

Big Blue also has some construction in the works on its Rochester campus.

A permit has been filed for an "acoustic chamber upgrade" valued at $195,000 in IBM's Building 020.

March 19, 2014

FirstTech pulls the plug on its Roch. store

FirstTech, the Apple computer store that opened just six months ago in Rochester's Apache Mall, closed its doors for good on Wednesday.

FirstTechclosingsignEmployees say their bosses closed the doors and changed the locks at 11 a.m. and then told the staff about the closing. FirstTech employed 15 people, including the store manager, in Rochester.

A sign on the door of the 3,100-square-foot store said the Rochester location, as well as the main FirstTech store in Minneapolis, are both closing due to lack of profitability.

A FirstTech email said staff will remain at the Rochester store through the end of the week for customers to pick-up orders and/or equipment that had been left there for repairs or maintenance. A doorbell was installed on the store's door. The sign said to ring the bell to arrange pick-up. It also stated that the store will be staffed for pick-ups from 10 a.m. to 5 p.m. A sticker next to the sign showed that the store was closed, when FedEx came by to pick-up packages from the store.

While the Rochester store is mostly shut down, the Minneapolis FirstTech store will remain open until the end of the month.

The email included this explanation for the abrupt closing, "Over the last two years in particular, the market changes in our industry have been rapid and dramatic. Competition has increased and margins have decreased making it more and more difficult to run our business profitably and still provide the high level of service we are known for."

More details are expected to be posted on the FirstTech website on Thursday.

FirstTech, which described itself as Minnesota's "leading Apple specialist," has sold and serviced Apple equipment, since 1977. It claims to be the oldest reseller of Apple products in the world.

Prior to the Oct. 12 opening of the Apache Mall store, General Manager and Co-owner Pete Paulsen was very optimistic about the project.

"We've done a lot of market research and Rochester is probably the most exciting market in the area. There are great things going on in Rochester and we think it's a great opportunity for us," he said.

February 12, 2014

KTTC owner to add more stations

The owner of the Rochester's KTTC-TV station announced Tuesday that it's acquiring four more stations, including one in Duluth.

Ef06da64-f7c8-40c1-b090-c0d0cb609f18Quincy Newspapers Inc., which has owned KTTC since 1974, is buying KBJR-TV and its satellite, KRII-TV, in Duluth, Minn.; WEEK-TV in Peoria/Bloomington, Ill.; WPTA-TV in Fort Wayne, Ind. and WBNG-TV in Binghamton, N.Y. from New York City-based Granite Broadcasting Corp.

Financial terms of the purchase were not released.

The deal also includes Quincy providing operating services to four other stations in the same type of the relationship that KTTC has with Fox affiliate KXLT-TV in Rochester. Those stations include KDLH-TV in Duluth, WISE-TV in Fort Wayne as well as WHOI-TV and WAOE-TV in Peoria/Bloomington.

The sale will not be official until it's approved by the Federal Communications Commission. If approved, Quincy's portfolio will grow to 23 stations in 14 markets. QNI also owns and operates two radio stations plus a newspaper in Quincy, Ill., along with a newspaper in Newton, N.J.

6a00d83451cc8269e20120a6402558970c-250wiJerry Watson, KTTC's general manager and one of Quincy's two regional vice presidents, says the timing of the FCC decision is hard to anticipate, but it usually takes a few months. A lot of final details cannot be worked out until that approval. However, Watson says this is a positive step for Quincy and Rochester.

"The good news is that Quincy is one of the very few small broadcast groups who are looking to grow. Unlike the investment firms buying up stations, the Oakley family (who own Quincy Broadcasting) are truly owner-operators. That's why I've stayed with them for 25 years," he says. "Picking up new stations is fun and we get to ride in like white knights."

Quincy purchased stations in Wisconsin and Iowa in 2006 and 2009.

“We are thrilled to acquire these stations as well as the operating agreements for the others,” stated Ralph M. Oakley, president-CEO of Quincy, in an announcement Tuesday. “Our company is committed to the communities and regions it serves by providing the best in local news, community affairs and entertainment.”

New_Quincy_logoThese new stations will add more work for the already-busy Watson, who already is in charge of  six broadcast markets in four states. The plan is for him to take over the management of the Peoria/Bloomington market. He already is in charge of the Illinois stations in Quincy and Rockford. The other regional vice president will manage the other seven markets.

It's possible this acquisition also could add more duties in Rochester, if any of these stations are added to the broadcasting "hub" based at KTTC. Rochester already handles the master control broadcast services for Quincy's operations in Sioux City and Cedar Rapids, Iowa.

"As the hub, we're the center of the spokes of the wheel. We could easily take on more," said Watson. "We're in a good position here in Rochester."

January 28, 2014

Mayo Clinic to ramp up link to Dept. of Defense

My colleague Jeff Hansel is writing an article about Mayo Clinic opening an office called Mayo Clinic Department of Defense Medical Research Office to better connect with Dept. of Defense for contracts and research.

Watch for Jeff's article on this soon.

I've touched on this topic in past years, so I dug up some info about recent DOD contracts with Mayo.

MayodefenseSince 2000, Mayo Clinic in Rochester has received about $41 million from the DOD. About $37 million of that $41 million was paid out for "Research and Development - Missile/Space Systems - Advanced Development," according to federal government records.

The majority of that work is done at the Dept. of Defense Medical Research Office, which is in the Mayo Support Center on West Circle Drive. That office has long been spearheaded by Dr. Barry K. Gilbert.

Some of the recent projects, according to federal contract records, include:

• R&D Services for Development and Demonstration of Capabilities of Hybrid Supercomputer

• Development of Ultra-High Linearity X-Band Mixers

• Study of Energy Harvesting Concepts, Evaluation of Quantum Orbital Magnetic Resonance Technologies

•R&D Services for Study of Energy Harvesting System Concepts

• Optical Communications: Monte Carlo Model - Preparation of Full-Scale Optical Communications Test.

I can't pretend to know what much of that means, though I believe the hybrid computer deal has something to do with immunizations and fighting virulent outbreaks. The optical communcations, I think, has something to do with transmitting medical information between hospital sites.

I confess this side of Mayo has always fascinated me. Hopefully, the creation of this new office will mean more of a spotlight will shine on Mayo Clinic's interesting military work.

January 22, 2014

It's hailing taxis in Roch.

Rochester's Yellow Cab rolled out a bunch on new Prius V hybrids Tuesday to much fanfare among local business leaders and Mayo Clinic.

YellowcabpicI trotted out to the first leg of Yellow Cab's Prius tour at Rochester Toyota. Fairly interesting. Here's a link to that article.

I had reported in June that Yellow Cab planned to switch over to hybrids. Back then, Med City Taxi was part of the transportation alliance that bought Yellow Cab. So two of Rochester's three cab companies were under the same corporate umbrella ... for a while.

Best Ride, the updated version of the transportation alliance that rolled out the new cars Tuesday, does not include Med City Taxi owner Tim and Tina Fliehr as before.

That means Rochester truly has three cab companies, Yellow Cab, Med City Taxi and Rochester Taxi, vying for the predicted DMC boom in bodies trying to get around this city.

The websites of the firms seem to put that growing competition on display.

• Yellow Cab -  yellowcabmedcity.com

• Med City Taxi - medcitytaxi.com

• Rochester Taxi - Rochester Taxi seems to only be on Facebook. It bills itself as the "people's taxi company."

Yellow Cab's use of Med City in its web address struck me as interesting and seemingly superfluous.

YellowcabwebsiteAnd then there's Yellow Cab's slogan on its website:

"Yellow Cab, your med-city taxi"

MedcitytaxiHhhmmmm.... sounds familiar. Heh.

As a side note to this little deal, I'd like to point out that my editor despise the use of the phrase Rochtaxi"Med City" to describe Rochester.

Using it in proper names is OK, but saying something like "The Med City is all aflutter with buzz about Mayo Clinic's DMC" is a no-no.

It was probably my overuse of the catchy phrase that caused it to fall out of favor. Sorry about that.

What do you think of Medropolis instead? Heh.

December 05, 2013

Breast cancer scanner maker, once linked to Mayo Clinic, sold to Mexican company

Qg3q4q112233Here's a potentially interesting nugget of news about San Diego-based Naviscan Inc., which was at one pointed linked with Mayo Clinic through intellectual property licenses as well as direct investment by Mayo Medical Ventures.

"… Certain Naviscan Inc. assets including intellectual property and the Naviscan Trademark" have been aquired by a Mexican medical scanner company called Compañía Mexicana de Radiología or CMR.

Not sure what that means exactly, but my guess is that CMR is now behind the steering wheel at Naviscan.

Now I don't know if Mayo Clinic still has any links with Naviscan, but it certainly did at one time. I've got calls into Mayo and Naviscan to check on that.

I wrote the Mayo Clinic-Naviscan relationship back in 2005 through 2007 or so. Sheesh, I've been doing this for a long time.

From back in November 2005:

Naviscan “entered into an agreement with Mayo Foundation for Medical Education and Research (Mayo Clinic) to clinically validate and commercialize a dynamic patented molecular imaging agent for use with Positron Emission Tomography (PET) and other imaging modalities. … Mayo Clinic has licensed the vitamin B-12 molecular imaging agent technology invented by Dr. Douglas A.Collins to Naviscan PET Systems, Inc and will receive royalties from this license. Researchers at the Mayo Clinic have published studies that cancers have high uptake of radioactive B-12, especially in breast tumors."

    --------------------
"The combination of the Mayo Clinic’s patented Vitamin B-12 molecular imaging agent and Naviscan’s high-resolution PET scanner holds great promise for the future in terms of early detection of breast cancers,” said Paul Grayson, newly-appointed CEO of Naviscan PET Systems, Inc. and a Managing Director of Sanderling Ventures. “We sought out Naviscan’s technology to strategically invest in this important imaging technology platform.” Naviscan is planning clinical trial work with Mayo Clinic and other luminary sites in the U.S. to prove the value of the PEM Flex in breast cancer patients, as well as for evaluating PEM’s role with high-risk patients.”

----

From the same date in 2005:

“Naviscan PET Systems has raised a $6.5 million in Series B funding for its high resolution positron emission tomography (PET) products. The firm said that it raised the round from Sanderling Ventures, with participation from Mayo Medical Ventures."

FYI, Sanderling Ventures now leases a space in the Mayo Clinic Business Accelerator.

November 11, 2013

Mayo Clinic, U of M startup ready for software rollout

Rochester's Evidentia Health got some press last week about its impending rollout at Fairview Health Systems.

Evidentia Health was one of the first tenants of Mayo Clinic Business Accelerator when it opened early this year.

Its billed as a health care IT company with licensed expe02272013mayoaccelerator1rtise and medical content from both Mayo Clinic and the University of Minnesota

It was co-founded by Mayo Clinic's Dr. Jeremy Friese in early 2012.Friese, an interventional radiologist, is the medical director for new ventures and business development in the Mayo Clinic's Center for Individualized Medicine.

Evidentia was profiled on Wednesday by TechdotMN, a non-profit business media group. Here's some from that piece by Yael Grauer:

As new provisions from the Affordable Healthcare Act take effect, Minnesota startup Evidentia Health is poised to help patients better understand their electronic health records (EHRs) while helping physicians meet criteria for “meaningful use” of EHR technology to improve patient care.

To receive EHR incentive pay under Medicare and Medicaid EHR Incentive Programs, healthcare providers must show they are meaningfully using EHRs by meeting various objectives.  Patients are required to be able to access their medical information within three days of when it’s created, and in 2014, this will be within one day.

The problem is that viewing EHR material and doing research online can be confusing to patients. They can jump to the wrong conclusions, worry unnecessarily and often have questions for their care team that may not be applicable.

Evidentia provides reports to both patients and physicians. The reports for patients include the most important sources of information, as well as secondary information for those interested in even more. In addition to the material in patient reports, physicians also receive recent medical research for evidence-based medicine studies.

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Founded in October 2012, Evidentia is funded by Mayo Clinic Ventures and the University of Minnesota. A pilot program is taking place at the Family Practice Internal Medicine groups in Rochester, and Evidentia is prepared to deploy within Fairview at University Hospital.

As new provisions from the Affordable Healthcare Act take effect, Minnesota startup Evidentia Health is poised to help patients better understand their electronic health records (EHRs) while helping physicians meet criteria for “meaningful use” of EHR technology to improve patient care.

To receive EHR incentive pay under Medicare and Medicaid EHR Incentive Programs, healthcare providers must show they are meaningfully using EHRs by meeting various objectives.  Patients are required to be able to access their medical information within three days of when it’s created, and in 2014, this will be within one day.

The problem is that viewing EHR material and doing research online can be confusing to patients. They can jump to the wrong conclusions, worry unnecessarily and often have questions for their care team that may not be applicable.

Evidentia provides reports to both patients and physicians. The reports for patients include the most important sources of information, as well as secondary information for those interested in even more. In addition to the material in patient reports, physicians also receive recent medical research for evidence-based medicine studies.

“Evidentia brings together all of the information that you need to know and get it in your hands in a way that’s both credible and trustworthy, has been reviewed by physicians, and is applicable to your situation,” says CTO Brent Backhaus.

When patients access their electronic medical records, they’ve often confused about certain key phrases or conditions. Evidentia looks at the text of the reports, highlights key phrases, and presents individualized information to the patient. The information selected is both algorithmically selected and reviewed by a physician.

“We pick information to present to both to the patient and the physician that make the most sense for them to see at that point in time about their specific condition,” Backhaus says.

In addition to Backhaus, who was the founding CTO of Virtual Radiologic, Evidentia’s team includes CEO Jeremy Friese, a Harvard MBA and Associate Chair of Radiology at Mayo Clinic, and chief product officer Dan Steinberger, a U of M physician and technology leader, and founder of ProVation Medical (which had a $100m exit in 2006).

Founded in October 2012, Evidentia is funded by Mayo Clinic Ventures and the University of Minnesota. A pilot program is taking place at the Family Practice Internal Medicine groups in Rochester, and Evidentia is prepared to deploy within Fairview at University Hospital.

- See more at: http://tech.mn/news/2013/11/06/evidentia-health-mayo-clinic-ventures/#sthash.tL8tSBOX.dpuf
Yael Grauer
Yael Grauer
Yael Grauer
Yael Grauer

As new provisions from the Affordable Healthcare Act take effect, Minnesota startup Evidentia Health is poised to help patients better understand their electronic health records (EHRs) while helping physicians meet criteria for “meaningful use” of EHR technology to improve patient care.

To receive EHR incentive pay under Medicare and Medicaid EHR Incentive Programs, healthcare providers must show they are meaningfully using EHRs by meeting various objectives.  Patients are required to be able to access their medical information within three days of when it’s created, and in 2014, this will be within one day.

The problem is that viewing EHR material and doing research online can be confusing to patients. They can jump to the wrong conclusions, worry unnecessarily and often have questions for their care team that may not be applicable.

Evidentia provides reports to both patients and physicians. The reports for patients include the most important sources of information, as well as secondary information for those interested in even more. In addition to the material in patient reports, physicians also receive recent medical research for evidence-based medicine studies.

“Evidentia brings together all of the information that you need to know and get it in your hands in a way that’s both credible and trustworthy, has been reviewed by physicians, and is applicable to your situation,” says CTO Brent Backhaus.

When patients access their electronic medical records, they’ve often confused about certain key phrases or conditions. Evidentia looks at the text of the reports, highlights key phrases, and presents individualized information to the patient. The information selected is both algorithmically selected and reviewed by a physician.

“We pick information to present to both to the patient and the physician that make the most sense for them to see at that point in time about their specific condition,” Backhaus says.

In addition to Backhaus, who was the founding CTO of Virtual Radiologic, Evidentia’s team includes CEO Jeremy Friese, a Harvard MBA and Associate Chair of Radiology at Mayo Clinic, and chief product officer Dan Steinberger, a U of M physician and technology leader, and founder of ProVation Medical (which had a $100m exit in 2006).

Founded in October 2012, Evidentia is funded by Mayo Clinic Ventures and the University of Minnesota. A pilot program is taking place at the Family Practice Internal Medicine groups in Rochester, and Evidentia is prepared to deploy within Fairview at University Hospital.

- See more at: http://tech.mn/news/2013/11/06/evidentia-health-mayo-clinic-ventures/#sthash.tL8tSBOX.dpufis it will roll out its technology this year.

September 09, 2013

IBM to drop 110,000 retirees off its health insurance plan

This is certainly an interesting shift that should impact a large number of Rochester retirees.

On Dec. 31, IBM is dropping all of its Medicare-eligible retirees from its health insurance coverage.

Maybe I should check with the Rochester IBM retirees group for some comments about this. Wonder if anyone would say anything on the record.

Here's some from an article by Spencer E. Ante of the Wall Street Journal:

International Business Machines Corp. plans to move about 110,000 retirees off its company-sponsored health plan and instead give them a payment to buy coverage on a health-insurance exchange, in a sign that even big, well-capitalized employers aren't likely to keep providing the once-common benefits as medical costs continue to rise.

The move, which will affect all IBM retirees once they become eligible for Medicare, will relieve the technology company of the responsibility of managing retirement health-care benefits. IBM said the growing cost of care makes its current plan unsustainable without big premium increases.

IBM buildinglogo-----

In notices signed by Chief Health Director Kyu Rhee, IBM has told retirees in recent weeks that to keep receiving coverage, they will need to pick a plan offered through Extend Health, a large private Medicare exchange run by New York-based Towers Watson & Co.

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"Cost increases under our current retirement group health care plan are no longer sustainable for you," IBM said in the notices. "Health care costs under IBM's current plan options for Medicare eligible retirees will nearly triple by 2020, significantly impacting your premium and out of pocket costs," the notice said.

August 29, 2013

Scraps of IBM news on servers, chips

Here's a sort of round-up of IBM news tidbits. They are mostly about the chip and server struggles, but I end on a brighter note about the Power8 chips. No word on how all of this could directly impact Rochester, but I am pursuing a story what the Power consortium means for the Rochester campus.

• Here's the take from the IDG News Service in PC World on the latest server sales report.

The server business continued to slide in the second quarter with worldwide revenue and unit sales down, IDC said Tuesday.

Revenue was down 6.2 per cent to $11.9 billion in the second consecutive quarter of year-over-year decline, as demand for servers continued to soften in most geographic regions, the research firm said. Unit shipments were also down 1.2 percent to 2 million, after also falling in the previous two quarters.

5115638122_5bf17912ccThe highest fall in revenue was in midrange systems, which dipped by about 22 percent year-over-year, while volume systems had a 2.4 percent revenue decline and revenue from high-end systems dipped 9.5 percent in the quarter ended June.

IBM held the number one position in the server market with a 27.9 percent share of revenue, but its share was down from over 29 percent last year. The company’s server revenue fell in the quarter by 10 percent year-over-year because of low demand for System x and Power Systems. IBM’s System z mainframe running z/OS, however, had a third consecutive quarter of growth, with revenue up by 9.9 percent year-over-year to $1.2 billion. The mainframe accounted for 9.8 percent of server revenue in the quarter.

• Here's some from a gloomy overall commentary from EE Times' Silicon Valley Bureau Chief Rick Merritt with the headline "IBM's Last Stand in CPUs?"

The Open Power Consortium could become IBM's last stand in microprocessors with huge implications for the future of Big Blue.  

Years ago, IBM took a shot at the mainstream PC market when it forged its PowerPC alliance with Motorola. Intel won, and the partners retrenched into the embedded market with the Power.org consortium. These days, their embedded partners -- LSI, Freescale, and others -- are all shifting to ARM cores.

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IBM buildinglogoExacerbating IBM's woes, the company appears to have been designed out of at least two of the three next-generation game consoles where it once provided its Cell multicore processor, ASIC technology, and other goodies. Microsoft's Xbox One and Sony's Playstation 4 both use AMD's cores. The muscular, custom console processors once were significant drivers of process technology and profits for Big Blue.

Now IBM is left to defend its main stronghold, the high-end server. This, too, is under siege.

These days the massive scale-out datacenters of web giants such as Amazon, Facebook, Google, and Microsoft are increasingly driving server technology and volumes. The x86 rules here along with an emerging streamlined style of design that's in opposition to the muscular scale-up style IBM practices for its classic customers in banking, government, and scientific markets.

Even in the Top 500 Supercomputers, IBM's old turf, it is losing ground to scale out designs using Nvidia GPUs paired with racks of x86 systems. Now Intel is coming on strong here with its own multicore Xeon Phi, which some say is offering higher performance, lower cost, and easier development than Nvidia GPUs.

In the coldest cut of all, Amazon recently won a deal to supply computer services to the CIA, encroaching on the business of IBM's federal systems division, the bluest of Big Blue business units. Like everyone else, the government is under pressure to try out cloud computing services such as Amazon to reduce cost.

• On a more upbeat note, IBM rolled out its new Power8 chips at the Hot Chips conference this week. Timothy Prickett Morgan covered it for The Register and IT Jungle.

Big iron sales are still generating $6bn to $7bn a year for IBM - which is enough to justify designing its own Power processors and building its own wafer baker.

At the Hot Chips conference at Stanford University on Monday, some of the chief architects behind the Power8 electronics were on hand to show off the feeds and speeds of the next-generation motor for the company's Power Systems lineup.

Significantly, the Power8 chip is also the foundation for Big Blue's OpenPower consortium - an effort to make it easier to hook networking, accelerators and other features into Power processors by allowing third parties to license chunks of intellectual property in the style of ARM Holdings and its RISC cores.

Ibm_power8_die_shotIBM announced the OpenPower effort earlier this month, with GPU maker Nvidia, network chip maker Mellanox Technologies, motherboard maker Tyan, and advertising moneymaker Google all lending their support to the cause.

Whether or not the OpenPower effort gains traction remains to be seen; the Power8 is so clearly engineered for midrange and enterprise systems for running applications on a giant shared memory space, backed by lots of cores and threads. Power8 does not belong in a smartphone unless you want one the size of a shoebox that weighs 20 pounds. But it most certainly does belong in a badass server, and Power8 is by far one of the most elegant chips that Big Blue has ever created, based on the initial specs.

August 26, 2013

Fool speculates on IBM's end being nigh

The MoUrltley Fool financial services firm posted an interesting take about IBM and its possible future on its website today.

Analyst Adrian Campos wrote an article called, "Why IBM's End Could Be Near." Kind of scary sounding. I'm sure Big Blue and investors aren't too worried since it was written by a card-carrying Fool.

FYI, here's why the firm uses the Motley Fool name:

The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Here's some from Campos' article:

IBM is having a rough year, producing a negative 6% return so far. The company had a wonderful come-back in the 90s thanks to its cost reductions and shift toward software and consulting, wh130110ibmwalljan10jkich led to amazing financial performance for a decade.  And since 2002, revenue, gross profit, and operating profit have compounded at annual rates of 3%, 6%, and 12%.

However, the current situation is totally different. IBM may need a transformation and re-engineering of its business. According to many IBM fans, that shouldn't be a big problem because IBM has been able to change several times in the past: this is just another time. Bears, on the other hand, keep reminding us that this time is different. What kind of future awaits IBM shareholders in the short and long run?  

Is IBM's end near?

In the first quarter of 2013, for the first time in 8 years IBM missed earnings expectations: sales declined 5%, posing a strong risk to IBM's long-term business, as two-thirds of its revenue base is recurring.

Full-year earnings guidance of $16.70 were just $0.07 below the consensus. But these $0.07  reflected long-term changes in the main markets IBM addresses: a contraction in global demand for IBM's high-end systems & hardware, and growth limits in the private cloud computing segment. These long-term trends started hurting IBM's cash flow already in 2009 and the $0.07  should have been seen as the beginning of a series of disappointments and pain for shareholders. 

Unfortunately, the second quarter results did not show the kind of substantive change that investors were looking forward to. IBM did beat the consensus by a tiny margin.

That was just not enough.

Ibm-logoAnalysts had kept estimates low but their expectations were actually higher: they tacitly were expecting a major change in business focus, which did not seem to happen. As a result, institutions from Credit Suisse to UBS downgraded the stock. It's simple to understand the downgrades: margins were down 3% from last year. The elephant is spending the same or more money, but making much less than before. 

Now, similar results coming from other companies in the software and services sector, like Oracle, show that the whole industry is in trouble. But to make matters worse, IBM still has 34% (hardware + System Z server sales) of its revenue coming from the commodity-like hardware segment, which is even riskier than the services segment, because of increasing competition from Intel's cheap machines.

Wrong focus?

In "IBM: The End is Near,  investor Arne Alsin identified a massive paradigm shift as the root of all of IBM's problems. The industry is moving to the public cloud: low-cost yet powerful computing architecture. IBM's main products (e.g. System Z and private cloud solutions), on the other hand, depend on the old paradigm--the private cloud, a soon-to-be legacy business.

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Final foolish thoughts

I agree with Alsin in the sense that the demand for expensive, multi-million dollar systems (let them be private clouds or something else) is contracting. Companies are moving to the public cloud instead. Expensive frameworks and commodity-like x86 servers are becoming endangered species.

That being said, I also don't want to underestimate the ability of IBM to change its business radically. Big Blue has done it several times. The latest time was when it exited the PC business in 2004 by divesting its PC unit to Lenovo. This was done 2 years after HPQ acquired Compaq and at a moment where the PC business was still strong. The elephant prioritized the sustainability of the business rather than meeting the street consensus for the next quarter.

A similar strategy and radical changes of focus are in great need again. This goes beyond acquiring companies with strong exposure to the public cloud (IBM recently acquired SoftLayer for $2 billion, 5 times revenue).

Finally, there will always be demand for expensive private clouds, for institutions willing to pay 100% more in price for an additional 5% safety improvement. What IBM needs to do is to reduce the exposure to such business, as soon as possible. In the meanwhile, the safety of having institutional clients and its vast resources will allow Big Blue to survive, but don't expect superb returns during the transition. It's gonna take a while, since it's just starting!